UK wage growth held steady at 5.9 per cent

Stay informed with free updates

Simply sign up to the UK employment myFT Digest — delivered directly to your inbox.

UK wage growth remained strong in the three months to January against a backdrop of slow hiring, according to official data that economists said would reinforce the case for the Bank of England to keep interest rates on hold today. 

Annual growth in average weekly earnings, excluding bonuses, held at 5.9 per cent in the three months to January, the Office for National Statistics said on Thursday. The figure was in line with economists’ expectations.

Including bonuses, wage growth in the period edged down slightly to 5.8 per cent, from 6.1 per cent in the three months to December.

Separate figures based on tax records showed payroll employment was flat, with a marginal increase of 9,000 employees between December and January, as companies worried about slow economic growth, the threat of trade wars and imminent increases in taxes and minimum wages.

Employment grew by just 0.1 per cent over the year to January. But provisional figures for February showed some signs of confidence creeping back, with an increase of 21,000, or 0.1 per cent on the month. The initial estimate for the latest month has often been revised up in the past.

The combination of strong wage growth and weaker hiring is challenging for the BoE’s monetary policy committee, which is expected to keep interest rates at 4.5 per cent when it announced its decision later on Thursday.

“With the labour market cooling rather than collapsing and wage growth stuck in the 5.5-6.0% range, we doubt the Bank of England will cut interest rates from 4.50% today,” said Ruth Gregory, at the consultancy Capital Economics. But she added: “All this leaves the Bank in a tricky position.”

The MPC is worried that the jobs market could deteriorate further, but it has also become more pessimistic about the rate at which the UK economy can grow without stoking price pressures. Inflation stood at 3 per cent in January, and is set to climb higher by the middle of the year. 

Andrew Bailey, the BoE governor, said last month there was a risk that Budget tax increases could both boost prices and hit jobs more than the BoE initially expected, as employers in some sectors could not cut pay for staff already on the minimum wage.