Wage growth in Britain slowed in the three months to November even though unemployment fell to its lowest since early 2006, underlining why the Bank of England is saying it will take its time before raising interest rates. Claims for jobless benefits slid 4,300 in December 2015 as the claimant remained unchanged at 2.3%.
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Pay excluding bonuses rose 1.9 percent in the three months through November from a year earlier compared with 2 percent in the quarter through October, the Office for National Statistics said in London on Wednesday.
The ONS is 95% confident that the figure of a 5.1% rate of unemployment is correct to plus or minus 0.2 percentage points – in other words, it’s between 4.9% and 5.3%.
Average weekly earnings, including bonuses, were up 2%, the slowest increase since February and down from the previous 2.4% rise.
The figures for October were 2.4% and 2% respectively.
IHS Global Insight chief economist for United Kingdom and Europe Howard Archer argues United Kingdom earnings growth is “still decent” and expects the unemployment rate to fall further in 2016.
“As a One Nation Government we will build on this throughout the coming year – doubling childcare for working parents and introducing the new National Living Wage – ensuring that everyone has increased financial security and the opportunity to get on and succeed in life”.
‘Real earnings continued to grow, albeit at a slower pace than in mid-2015’.
Ben Brettell, senior economist at Hargreaves Lansdown, said: “Another day, another data release underlining the case for leaving interest rates on hold”.
The data comes after Bank of England governor Mark Carney ruled out an immediate rise in interest rates in the country, saying that collapsing oil prices and an “unforgiving” global environment meant that tighter monetary policy was not yet necessary, according to the BBC. The unemployment rate has fallen below the rate we last saw before the great recession, and now stands at its lowest rate for a decade. If the Bank’s estimate was correct, we should now be seeing pay rising at a rate which threatens the achievement of the 2% inflation target.
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“The latest pay numbers will exacerbate concerns raised in recent MPC meetings that very low inflation may be pushing down pay settlements, threatening a negative feedback between wages and prices”.
