United Kingdom: Employment growth remains solid but wage growth is weak
The unemployment rate remained at a multi-decade low of 4.2% in the February-April period, where it has been for three consecutive rolling quarters. This was underpinned by ongoing strong employment growth: 146,000 jobs were added compared to the November-January period, once more beating market expectations. However, the rise was mainly a result of greater part-time work, with the total hours worked in the economy declining slightly. Higher employment saw the inactivity rate remain at an all-time low of 21.0%.
Despite the tight labor market, the recent recovery in wages appeared to lose some impetus in February-April, with nominal earnings growth excluding bonuses dipping to 2.8% from 2.9% in the prior rolling quarter. Although real earnings continued to rise marginally, average total pay is still below the pre-crisis peak reached in 2008.
The Central Bank expects nominal regular pay growth to continue to hover slightly below 3.0% this year. However, as inflation gradually declines, this should see a gradual uptick in real wage growth, although it will likely remain sluggish. Public-sector pay—which has been constrained in recent years by austerity measures—is likely pick up as the government gradually lifts its spending straightjacket thanks to an improved fiscal situation.