© Reuters. People walk over London Bridge looking at a view of Tower Bridge in the City of London financial district in London, Britain, October 25, 2023. REUTERS/ Susannah Ireland/file photo
By William Schomberg and David Milliken
LONDON (Reuters) -British wage growth slowed by the most in almost two years, official data showed on Tuesday, but pay is still rising too fast for the Bank of England to cut interest rates soon.
Earnings excluding bonuses were 7.3% higher in the three months to October than a year earlier compared with a growth rate of 7.8% in the three months to September, according to the Office for National Statistics (ONS) figures.
The fall was the sharpest since the three months to November 2021. Economists polled by Reuters had forecast wage growth of 7.4%.
“While annual growth in earnings remains high in cash terms, there are some signs that wage pressure might be easing overall,” Darren Morgan, director of economic statistics at the ONS, said.
Britain’s economy is stagnating and some economists have said it could go into a shallow recession over the coming months.
But many employers are struggling to fill vacancies after the workforce contracted during the pandemic, and because of post-Brexit restrictions on workers from the European Union.
The slowdown in regular pay growth represented a further fall from a summer peak of 7.9% that was the highest since the ONS began collecting the data in 2001.
Including bonuses, which are typically volatile, pay growth slowed to 7.2% from 8.0% in the three months to September.
The BoE has said it is worried that pay growth, especially in the private sector, is still too strong to get inflation down to its 2% target, even as the broader economy stagnates.
Earnings excluding bonuses in the private sector dropped to 7.3% in the three months to October compared with 7.9% in the July-September period.
The central bank raised interest rates 14 times in a row between December 2021 and August this year. It has since kept rates on hold and is again expected to keep borrowing costs unchanged on Thursday.
RATE CUTS ARE NOT CLOSE
Officials have said they are not ready to cut borrowing costs.
Although inflation is down from 11.1% in October last year, its most recent reading of 4.6% is more than double the BoE’s 2% target.
“Signs of labour market cooling will provide some reassurance to the Bank of England Monetary Policy Committee,” Jack Finney, an economist at PwC, said, adding that the data was not yet convincing enough to swing the BoE towards relaxing its tough stance on borrowing costs.
“Policymakers are expected to stress that rates will need to remain in restrictive territory for some time.”
Vacancies fell for a 17th time in a row in the three months to November and were down almost 30% from their peak although they remained above pre-pandemic levels.
Sterling weakened against the U.S. dollar after the ONS released its figures.
Tuesday’s data also showed that Britain’s unemployment rate held at 4.2% in the three months to September while employment rose by 50,000 people.
The ONS has said those figures may not prove reliable as it has had to change the way that it measures the jobs market via its monthly Labour Force Survey because of a drop in the number of responses it receives.
Despite the slowdown in headline pay growth, workers saw the biggest increase in their incomes after adjusting for consumer price inflation since the three months to September 2021, with a rise of 1.2% on an annual basis.