UK total pay growth sustained its strong momentum in the three months to February, growing at the fastest pace in over a decade, as employers ramped-up hiring to a fresh record high, ahead of a possibly chaotic Brexit.
The total pay grew 3.5 percent year-on-year in the three months to February, same as in December and January, preliminary data from the Office for National Statistics showed on Tuesday. The growth rate matched economists’ consensus. The pace of growth was the strongest since July 2008, when total earnings rose at the same rate.
Weekly earnings excluding bonuses rose 3.4 percent year-on-year in the three months to February, which was slightly slower than the 3.5 percent increase in January. Regular pay growth was also in line with economists’ expectations, but the pace of growth slowed for the first time since June.
The level of employment in the UK grew by 179,000 persons to a record high of 32.72 million in the three months to February. Economists had forecast a 173,000 increase.
The ILO unemployment rate was 3.9 percent same as in January, and in line with economists’ expectations.
“The jobs market remains robust, with the number of people in work continuing to grow,” ONS Deputy Head of Labor Market Matt Hughes said. “The increase over the past year is all coming from full-timers, both employees and the self-employed.”
Pay growth though strong is below the above 4 percent rates seen before the 2008 global financial crisis.
The robust labor market and the strong pay growth calls for an interest rate hike from the Bank of England, but the lingering uncertainty regarding Brexit complicates the picture.
“We think it is now pretty unlikely that the Bank of England will hike rates this year – unless some form of [Brexit] deal is approved earlier than most people expect,” ING economist James Smith said.
“However if wage growth continues to perform relatively well…, then further gradual tightening cannot be ruled out in the medium term.”
Last week, the International Monetary Fund warned that the UK economy would lose about 3.5 percent of GDP by 2021 in a no-deal Brexit.
The lender slashed the UK growth forecast for this year to 1.2 percent from 1.5 percent and the outlook for next year was trimmed to 1.4 percent from 1.6 percent.
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