UK wages rise at the fastest pace in six years as employment unexpectedly falls
The pound leapt against the dollar as official data showed UK wages rose at the fastest pace in six years, while employment unexpectedly fell.
Annual average weekly earnings, excluding bonuses, increased by 2.9 per cent in the three months to July, the fastest growth since 2009. Including bonuses, average weekly earnings growth also rose by 2.9 percent, recovering from a slowdown in the three months to June.
The monthly unemployment rate slipped somewhat to 5.5 per cent, defying economists' expectations for it to remain stuck at 5.6 per cent.
The number of people out of work rose by 10,000 to 1.82m, while the number of people in employment rose by 42,000 to 31.1m.
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However economists were split over whether today's data would push the Bank of England (BoE) closer towards hiking interest rates from a record low 0.5 per cent.
"The long-awaited upturn in pay, which has been the missing element of the UK’s economic recovery, looks to be finally upon us, reviving the prospect of a rate hike by the end of the year." Chris Williamson, chief economist at Markit, said.
But Paul Hollingsworth, UK economist at Capital Economics, said: "We don’t think that the latest data indicates that the monetary policy committee are likely to follow the Fed and raise rates this year. Indeed, greater scope for a productivity rebound in the UK than in the US means that growth in unit wage costs will stay modest despite faster wage growth."
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Threadneedle Street's latest minutes suggested that higher pay reflects increased productivity, meaning it's less likely to stoke inflationary pressures, as it offsets the impact of firms' rising production costs.
The Bank's rate-setters also said that slowing employment growth could reflect a weaker outlook for the economy, or a strengthening of underlying productivity. At the same time, they said it could indicate a tightening labour market, with firms finding it harder to recruit skilled workers.
Chancellor George Osborne described the latest data as good news but, in a nod to new Labour leader Jeremy Corbyn, warned "we still face risks both from the global economy and from those at home who would undermine our economic security, hike taxes and nationalise industry."
