Labour market data from the Office for National Statistics (ONS), published this morning (12 March), shows the annual rate of wage growth is falling.
Growth in total earnings including bonuses reached 5.6% from November last year to January 2024, while annual growth excluding bonuses came in at 6.1%. Adjusted for inflation, total pay rose by 1.4% from November 2023 to January 2024, while regular pay increased by 1.8%.
UK employment rates also fell below estimates compared to a year ago and fell by 0.1 percentage points over the quarter. However, the ONS cautioned that this month’s figures should “be treated as a provisional estimate” and are “likely to be revised when more data are received next month”.
See also: “UK employment growth slows in 2023 but wages outpace inflation “
Lindsay James, investment strategist at Quilter Investors, said the statistics “hopefully represent a more accurate data set for the Bank of England” to make decisions at its next Monetary Policy Meeting.
“For months, the Bank has been effectively navigating through the fog of experimental employment figures due to declining numbers of respondents to its ONS’s Labour Force Survey, which left the Bank akin to a pilot flying blind through a storm of economic uncertainty,” she said.
“The declining figures have prompted a series of ‘in development’ statistics that have injected a dose of uncertainty into what the true economic narrative is. The latest data however suggests that the unemployment rate has ticked up slightly to 3.9%.
“The fear has been that without the better data at hand the Bank might end up in a situation of accidental over-tightening of monetary policy, after inflicting more pain than necessary on the jobs market.”
However, with earnings growth slowing and coming in slightly below forecasts, James said this should help inflation “continue its downward trajectory back to the BoE’s 2% target”.
“Today’s statistics point to a slightly ailing labour market, but it is still not showing anywhere near the level of slowdown that comes with a typical recession,” she added. “While growth in employment is slowing, with January payroll figures revised significantly lower and wage growth continuing a slight descent, these figures suggest that the labour market is beginning to see a real impact from the current level of interest rates, providing the Bank of England with further evidence that recent tightening is having its desired effect.”
