LONDON – – British wage growth slowed in the final three months of 2015, official data showed on Wednesday, underscoring the view that the Bank of England will keep interest rates at a record low for some time yet.
Britain’s unemployment rate remained unchanged at 5.1 percent in the final quarter of 2015, matching the three months to November which was the lowest since mid-2005. Economists in a Reuters poll expected a fall to 5.0 percent.
Total annual wage growth slowed as expected to 1.9 percent, its lowest since February, from 2.1 percent in the three months to November, the Office for National Statistics said. Excluding bonuses, wage growth picked up slightly to 2.0 percent in the three months to December from 1.9 percent.
“While the employment rate continues to hit new highs and there are more job vacancies than ever previously recorded, earnings growth remains subdued and markedly below the recent peak of mid-2015,” Nick Palmer, ONS statistician said.
The central bank has been puzzled by the failure of British wages to pick up more rapidly despite a record number of people in work and unemployment at its lowest since before the financial crisis.
Last month Carney said he was looking for a pick up in underlying price pressures – chiefly wage growth – as well as above-trend economic growth and core inflation moving towards the inflation target before considering a rate hike.
At the start of the month, the BoE estimated that fourth-quarter wage growth for 2015 would come in at 1.75 percent, rising to 3 percent by the end of 2016, though past BoE wage forecasts have usually proved too optimistic.
In December alone, total wages in the private sector, which are monitored closely by the BoE, rose by 2.1 percent, compared with 2.3 percent in November.
Some BoE officials have said tame inflation has been partly to blame for sluggish wage growth last year. The latest official figures showed annual inflation at a one-year high of 0.3 percent, and the central bank expects inflation to stay below 1 percent for the rest of the year.
Few economists expect the BoE to raise rates before late this year at the earliest, and many in financial markets think it could take much longer.
The ONS said the number of people in employment rose to a record high of 31.42 million, taking the employment rate to 74.1 percent in the final three months of the year.
The number of people claiming unemployment benefits fell by 14,800 in January to 760,200 – the lowest since 1975.