|
 Official data released on Wednesday showed earnings excluding
bonuses rose by an annual 0.7 percent in the three months through
May.
That was less than half the rate of inflation and the slowest growth
in regular pay since records began in 2001, taking some of the shine
off the economic recovery which Britain's ruling Conservative Party
is hoping will help deliver success in next year's national
elections.
British government bond prices briefly rose and sterling fell on the
weak earnings numbers, which could ease pressure on the BoE to raise
interest rates later this year.
"With few signs that the labor market is a source of inflationary
pressure, there remains no pressing need for the Monetary Policy
Committee to raise interest rates this year," said Samuel Tombs, an
economist at consultancy Capital Economics.
Britain's economy has been recovering fast for more than a year,
raising questions about the need for continued stimulus.
The Office for National Statistics said on Wednesday that the
jobless rate fell to 6.5 percent from March to May from 6.6 percent
a month earlier, down sharply from 7.8 percent in the same period
last year.
The unemployment rate, which matched economists' forecasts in a
Reuters poll, was the lowest since the October-December period of
2008 - when the global financial crisis was snowballing.
But the weak earnings figures underscored the BoE’s view that the
recovery can continue without risking a big pickup in price
pressures.
In the three months through May, total pay including bonuses rose a
yearly 0.3 percent, the weakest growth in five years.
That was below a forecast of 0.5 percent in the Reuters poll and
down from a yearly rise of 0.8 percent in the three months to April.
The Bank is forecasting 2.5 percent wage growth this year, up from
1.25 percent for 2013 as a whole but still well below a pre-crisis
average of 4.5 percent.
BONUS IMPACT
An ONS official said May's total earnings growth was still affected
by comparisons with the same month last year, when many companies
made delayed payments of bonuses to help their employees benefit
from an earlier cut in income tax.
The effect of the rush of delayed bonuses also impacted April's
earnings readings.
In the month of May alone, total pay rose by 0.4 percent, up from a
fall of 1.5 percent in April, the ONS said.
[to top of second column] |
But excluding bonuses, pay rose by an annual 0.6 percent in May
alone, barely picking up from 0.5 percent in April.
The Conservative Party is highlighting the fall in unemployment as
it tries to win over voters ahead of the May 2015 national
elections. But the opposition Labour party is focusing on what it
calls Britain’s cost of living crisis.
Pay growth lagged inflation for most of the period since 2008, then
narrowly overtook it at the start of this year, and then fell back
again in the last couple of months.
Data on Tuesday showed inflation in June rose to 1.9 percent.
Wednesday's labor market figures showed the number of people in
employment rose by 254,000 to 30.643 million in the three months
through May.
The rise in employment was due mainly to people being hired by
companies. Much of the initial recovery in the labor market, which
began last year, had been due to people becoming self-employed.
The number of people claiming unemployment benefit in June fell by a
bigger-than-expected 36,300, and the number for May was also revised
to show a bigger fall than first reported.
The decrease in unemployment to 6.5 percent took the rate further
below the 7 percent which was originally the level at which the BoE
said it would consider raising interest rates.
But unemployment then fell much faster than it expected, prompting
the central bank to switch in February to a broader, and
harder-to-measure, assessment of spare capacity in the economy as
its yardstick for considering a rate hike.
(Writing by William Schomberg; Editing by Hugh Lawson)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright
2014 Reuters. All rights reserved. This material may not be
published, broadcast, rewritten or redistributed. |
