Wage growth slows despite unemployment fall

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Wage growth unexpectedly slipped to 2.8% from 2.9% in the three months to April, despite unemployment falling by 38,000 to 1.42 million, official figures show.

Economists had expected wage growth to remain steady at 2.9%.

The slowdown is likely to dampen expectations of an interest rate rise in August.

Wage growth is one of the key figures the Bank of England monitors to assess the health of the UK economy.

The ONS said the number of people in work reached a record high of 32.3 million.

“Employment has continued to rise, while the unemployment rate remained at its lowest for over 40 years.

“Wages, both including and excluding bonuses, are continuing to increase, and slightly faster than inflation,” the ONS’s statistician, David Freeman, said.

Mixed reaction

Wage growth is currently above the level of inflation of 2.4%.

It remains, though, well below the five-year high of 3.1% seen in November.

The Bank of England is expecting wage growth to continue to pick up.

Last month it said it expected to see pay growth of 2.75% a year by the end of 2018, rising to 3.5% by the end of 2020.

The ONS’s latest figures received a mixed reception.

Andrew Wishart, UK economist at Capital Economics, said: “Another strong set of labour market figures in April suggests that firms remain positive about the outlook for demand despite the economy going through a soft patch at the start of the year.”

But the TUC’s General Secretary, Frances O’Grady, said: “Wage growth is stuck in the slow lane. At this rate pay packets won’t recover to their pre-recession levels for years.

“We need to speed things up. Extending collective bargaining would boost living standards and help workers get a fairer share of the wealth they create.”

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