Ashley Webb, UK economist at Capital Economics, said some of the Bank’s policymakers “may be worried” by the resurgence in private sector pay growth, but said she suspected most of them would be “look at the signs that the loosening in the labour market”, and cut rates.
The UK’s unemployment rate was estimated to have ticked up to 4.4%, while the estimated number of vacancies dropped 2.9% to 812,000 from October to December, continuing the decline but still remaining above pre-Covid pandemic levels.
The ONS advised treating its jobs market figures with “caution”, due to questions over the relatability of the data caused by low response rates to its survey.
Economics at Pantheon Macroeconomics said employment dropped in December as “firms put hiring on hold” following tax rises announced on businesses in the Budget.
But they added: “There is little sign from jobless claims and redundancies of a sharp labour market downturn. The labour market is loosening, but only gradually.”
Ms Coles said the “good news on wages” could be short-lived going further into the year as there was a “risk that businesses will be under pressure to cut costs in the face of higher employers’ National Insurance bills, so will cut back on both staff and wage rises”.
Regular pay increased by an annual average of 5.6% between September and November, compared with the same period the year before, but when taking into account inflation, the real wage increase was 3.4%.
