UK wage growth slows, jobless claimant count drops
The headline unemployment rate remained at 4.8%, as expected, and with employment improving by 37,000 in the three months to December total employment reached a new record high of 74.6%.
More timely data, in the form of the jobless claimant count showed a big drop of 42.4K versus the 20.5K fall in December, while the forecast had been for a small 1K rise.
The ONS said the labour market "appears to be edging towards full capacity", also noting that the employment rate rate for women reached 70% for the first time on record.
However, average earnings including bonuses slowed to 2.6% in December from the previous 2.8%, noticeably short of the 2.8% consensus forecast. Excluding bonuses, wages fell to 2.6% from 2.7%, when no change was again forecast.
Furthermore, year-over-year growth in average weekly wages fell to 1.9% in December, the lowest rate since February, from 2.9% in November.
Following Tuesday's news that CPI inflation jumped to 1.8%, the unexpected dip in wage growth means real wage growth continues for now but is experiencing the beginnings of a squeeze.
The Bank of England forecasts inflation this year will average 2.7%, meaning a continued deceleration in pay growth could see real wages fall, which would squeeze household budgets as the year goes on.
Long dated gilt yields declined and sterling fell 0.3% against the dollar on the news. ■