Agencies
Wage growth in Britain decelerated significantly, while unemployment climbed to its highest level in almost four years during the three months leading up to April, according to official data on Tuesday that could prompt the Bank of England (BoE) to adopt a less cautious stance on further interest rate cuts.
Pay growth excluding bonuses slowed to 5.2%, its weakest since the three months to September, and down more than expected from 5.5% in January to March this year. The jobless rate rose to 4.6% from 4.5%, its highest since the three months to May 2021, the Office for National Statistics (ONS) said.
The April data was the first since employers were hit by a 25 billion pound ($34 billion) rise in social security contributions, which came into force at the start of the month, as well as a 6.7% increase in the minimum wage.
The downturn appeared to gather pace in May, according to separate tax office data which showed a slump of 109,000 in the number of employees on company payrolls, the most since May 2020 at the height of the COVID-19 pandemic.
The Bank of Englandwhich is expected to keep rates on hold at next week’s meeting – has been trying to gauge if inflation pressures in Britain’s labor market are easing sufficiently for it to continue cutting interest rates at its current quarterly pace.
“While the bar for the Bank of England to speed up rate cuts seems to be set fairly high, this data helps cement cuts in August and November,” James Smith, economist at Dutch bank ING, said.
Sterling fell three-quarters of a cent against the U.S. dollar, two-year gilt yields dropped to a two-week low, and interest rate futures priced in a greater chance of two further rate cuts this year following the data.
