The pace of pay growth in the UK remained stable, and there were signs of stability in the jobs market, contrasting with concerns regarding a decline in hiring due to upcoming tax increases that have upset some employers.
Private sector pay, excluding bonuses, rose by 6.1% in the three months to January, slightly slower than the 6.2% increase seen at the end of 2024. The Bank of England has indicated that recent wage growth is excessive and has opted to keep interest rates steady.
Across the economy, excluding bonuses, pay growth held at 5.9%, unchanged from the previous quarter. When including bonuses, pay growth decreased to 5.8% from 6.1%. Economists had expected both measures of wage growth to rise to 5.9%.
Despite surveys indicating weaker hiring intentions due to impending employer tax hikes, the official data currently shows no signs of reduced employment or increased redundancies. Data from employers to tax authorities revealed a net increase of 21,000 employees in February, an improvement from a revised gain of 9,000 in January.
In another indication of a stabilizing job market, the number of job vacancies from December to February rose to 816,000, marking the first increase when comparing three-month periods since April to June 2022.
The data does not appear to alter the Bank of England's outlook on the economy, as officials assess whether inflationary pressures in the labor market are sufficiently easing to justify further interest rate cuts. The latest labor market figures were provided to the Bank's Monetary Policy Committee prior to their discussions this week.
Following the data release, the value of the pound and government bond prices remained largely unchanged against the dollar. An increase in employers' social security contributions starting in April is anticipated to slow wage growth and weaken hiring.
Recent data indicated that pay settlements granted by British employers aligned with inflation for the first time since October 2023. The unemployment rate, based on an ONS survey undergoing revision and no longer regarded as an accurate measure, remained at 4.4%.
Concerns were raised by KPMG UK’s chief economist regarding the potential impact of escalating global trade tensions, particularly due to U.S. tariffs on trading partners, on the stability of Britain’s job market. Continued deterioration in global trade relations could adversely affect hiring intentions and increase unemployment.