UK wage growth slowed in May to the lowest level in two years, according to figures from the Office for National Statistics. Annual pay growth eased to 5.7% in the three months to May, matching predictions from City economists. Unemployment remained unchanged at 4.4%, and the number of job vacancies fell by 30,000. Real wage growth, taking into account the rising cost of living, rose by 3% in the three months to May. Liz McKeown of the ONS noted signs of a cooling labor market, with a weakening growth in the number of employees on the payroll and a gradual increase in unemployment.
Economic inactivity remains high, with close to 9.4 million people out of the workforce, a fact that the new work and pensions secretary Liz Kendall called a dire inheritance. Financial markets expect the Bank of England to hold off from cutting interest rates at their next meeting, likely waiting until inflation remains close to the 2% target before considering a rate cut. Despite the slowdown in the jobs market, economists believe wage growth remains inconsistent with the inflation target, and there is some debate about the timing of a potential rate cut.
Several members of the Bank’s monetary policy committee have warned about the impact of service sector inflation and a tight jobs market. The European Central Bank recently cut borrowing costs, while the US Federal Reserve is also considering a rate cut in the near future. The figures come as the UK continues to face economic challenges, with wage growth slowing and unemployment showing signs of increasing.
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