UK employment hits new record but wage growth slows

Employment in Britain rose to a new record high in the three months to April but wage growth unexpectedly slowed.

The number of people in work increased by 146,000 from the previous quarter taking the total to 32.39m, the Office for National Statistics said. Unemployment fell by 38,000 to 1.42m – a rate of 4.2% that was in line with economists’ expectations and remained the lowest since 1975.

Total earnings including bonuses rose 2.5% – down from 2.6% in the three months to March. Economists on average had expected the rate of wage growth to be unchanged. Excluding bonuses, average weekly earnings growth slipped to 2.8% from 2.9%.

The weaker than expected wage growth could add to doubts about the strength of the economy as the Bank of England weighs up whether to increase interest rates in August. The BoE’s monetary policy committee has cited the prospect of higher pay growth as one of its main reasons for considering a rate rise.

The jobs and wages figures followed a series of weak economic numbers that cast doubt on the BoE’s belief that the economy’s sharp slowdown in the first quarter was caused by bad weather.

Andrew Wishart, UK economist at Capital Economics, said: “The strong employment numbers weren’t matched by pay, which was a little disappointing … As long as economic activity holds up, we still think that the MPC will press ahead and increase Bank Rate in August."

A rise in the pound against the dollar and the euro after the release of the data indicated the market felt this was a solid set of data.

David Cheetham, chief market analyst at XTB, described the jobs report as "pretty solid overall", with the squeeze on real wages alleviated somewhat, as inflation has drifted back towards target after peaking near the back-end of last year, with the latest CPI release due on Wednesday and expected to remain at 2.4%.