Sunday 23 September 2018

UK wages rise as number of Eastern European workers falls ahead of Brexit

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Brian Swint and Lucy Meakin

UK pay is picking up after employment among citizens of the eastern European countries that joined the European Union more than a decade ago fell for the first time since 2009.

Average weekly earnings excluding bonuses rose 2.5pc in the fourth quarter from a year earlier, the most since December 2016, the British Office for National Statistics said on Wednesday. The overall employment rate rose to 75.2pc, close to a record, though unemployment increased to 4.4pc as fewer workers were economically inactive.

While the figures may be welcomed by Brexit supporters who complained that open immigration undermined the wages of local workers, the data overall provides a more mixed picture for policy makers.

Speculation has mounted in recent weeks that the BOE's Monetary Policy Committee could raise interest rates again as early as May, but the first increase in the jobless rate in 17 months may undermine rate bets in the short term, according to Scotiabank economist Alan Clarke.

"In MPC terms, higher unemployment means more spare capacity and more tolerance for above-target inflation and could support the doves," he said. "Ultimately we expect higher wage inflation to dominate but, as we warned, it was never going to be smooth sailing."

BOE officials estimate there is little slack left in the economy, with surveys suggesting recruitment difficulties are forcing some firms to raise wages. Central-bank forecasts show unemployment averaging 4.2pc in the coming quarters, below the 4.25pc rate officials say the economy can sustain without generating inflationary pressure.

The pound weakened after the data came out. UK pay growth is still slower than inflation, which is running at 3pc. Private-sector pay gains accelerated to 2.6pc from 2.5pc.

Employment rose by 330,000 last year and the gain was largely driven by UK nationals, the ONS said. Employment among nationals from the so-called EU 8 fell by 1pc, and there was a 1.5pc drop among non-EU citizens. Overall, employment of non-UK nationals rose by 3.1pc, half the pace seen in 2016.

Bloomberg

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