UK wage growth in the fourth quarter was slightly lower than expected, while the unemployment rate unexpectedly declined, indicating a persistently tight labor market influenced by inflationary pressures. These developments are prompting the Bank of England to consider when to implement interest rate cuts.
According to the Office for National Statistics, average pay growth (excluding bonuses) was 6.2% between October and December, compared to 6.7% in the previous three-month period. Simultaneously, the joblessness rate stood at 3.8% during the same period, which is lower than the 3.9% recorded in the previous three months. These figures deviate from economists’ predictions of 6.1% for wage growth and 4.0% for the unemployment rate.
Interestingly, recent updates made by the ONS reveal that the UK’s labor market is even tighter than initially estimated. For instance, the rate of joblessness in the three months leading up to November was revised to 4.2% from the previously reported 3.9%.
Although the decline in wage growth may lead Bank of England policymakers to consider implementing rate cuts, the lower unemployment rate and slower-than-anticipated easing in wages could potentially delay such actions.