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You can find the current article at its original source at https://www.theguardian.com/business/2023/jun/13/interest-rate-rise-pickup-uk-wage-growth-bank-of-england

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Don’t rule out half-point interest rate rise after pickup in UK wage growth Don’t rule out half-point interest rate rise after pickup in UK wage growth
(about 1 hour later)
Bank of England had been looking for signs of labour market softening so it could take foot off brakeBank of England had been looking for signs of labour market softening so it could take foot off brake
The resilience of Britain’s labour market has been a feature of the post-pandemic economic landscape, and that unexpectedly strong trend shows few signs of ending. The 12 increases in interest rates that have taken borrowing costs from 0.1% to 4.5% since December 2021 are affecting house prices but they have yet to put much of a dent in demand for workers.The resilience of Britain’s labour market has been a feature of the post-pandemic economic landscape, and that unexpectedly strong trend shows few signs of ending. The 12 increases in interest rates that have taken borrowing costs from 0.1% to 4.5% since December 2021 are affecting house prices but they have yet to put much of a dent in demand for workers.
The latest data from the Office for National Statistics shows employment and total hours worked at record levels, a fall in inactivity and – most significant of all – a pickup in wage growth.The latest data from the Office for National Statistics shows employment and total hours worked at record levels, a fall in inactivity and – most significant of all – a pickup in wage growth.
Part of the reason earnings growth picked up was because of April’s near 10% increase in the national minimum wage but there was also evidence of rising wages in higher-paid sectors of the economy such as finance and business services.Part of the reason earnings growth picked up was because of April’s near 10% increase in the national minimum wage but there was also evidence of rising wages in higher-paid sectors of the economy such as finance and business services.
All of which presents a headache for the Bank of England, which for months has been looking for clear signs that the labour market is softening so it can take its foot off the interest rate brake. All of this presents a headache for the Bank of England, which for months has been looking for clear signs that the labour market is softening so it can take its foot off the interest rate brake.
Yet over the three months to April, the economy generated an additional 250,000 jobs, a much higher figure than the 142,000 in the three months to March. Inactivity fell because more people were looking for – and finding – work.Yet over the three months to April, the economy generated an additional 250,000 jobs, a much higher figure than the 142,000 in the three months to March. Inactivity fell because more people were looking for – and finding – work.
Wage growth including bonuses in the latest three months was 6.5% higher than in the same period a year ago, compared with 6.1% in the three months ending in March. Pay growth excluding bonuses picked up to 7.2% from 6.8%.Wage growth including bonuses in the latest three months was 6.5% higher than in the same period a year ago, compared with 6.1% in the three months ending in March. Pay growth excluding bonuses picked up to 7.2% from 6.8%.
Annual pay growth in the private sector rose and is running at 7.6%, not enough to keep pace with inflation but far higher than the Bank is comfortable with.Annual pay growth in the private sector rose and is running at 7.6%, not enough to keep pace with inflation but far higher than the Bank is comfortable with.
It is reasonably clear what is happening. Workers are seeking pay increases that will prevent their living standards from falling. People who previously were not looking for work are now doing so in response to cost of living pressures on their household budgets. The avoidance of a recession over the winter has made companies reluctant to lose workers, even though many are still only hiring on a part-time basis. It is reasonably clear what is happening. Workers are seeking pay increases that will prevent their living standards from falling. People who previously were not looking for work are now doing so in response to cost of living pressures on their household budgets. The avoidance of a recession over the winter has made companies reluctant to lose workers, even though many are still hiring only on a part-time basis.
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There are some tentative signs that the labour market is softening, including another fall in the stock of job vacancies, but they will not be nearly enough to assuage fears on the Bank’s monetary policy committee that strong wage growth risks becoming entrenched. A 13th increase in interest rates is nailed on for next week. What’s more, some members of the MPC will probably be arguing for a half-point rather than a quarter-point increase.There are some tentative signs that the labour market is softening, including another fall in the stock of job vacancies, but they will not be nearly enough to assuage fears on the Bank’s monetary policy committee that strong wage growth risks becoming entrenched. A 13th increase in interest rates is nailed on for next week. What’s more, some members of the MPC will probably be arguing for a half-point rather than a quarter-point increase.