No Brexit Hit Yet for UK Workers as Pay Growth Rises

British workers saw their pay grow at the fastest pace in more than a year in the three months to November, official data showed on Wednesday, adding to signs that the country’s economy ended 2016 strongly despite the shock of the Brexit vote.

The jobless rate remained at an 11-year low of 4.8 percent and the employment rate stayed at all-time record high, the Office for National Statistics said.

There were a few signs the strong pace of job creation of recent years has peaked. The number of people in work fell for a second time in a row, the first back-to-back fall since the middle of 2015. And the number of hours worked edged down.

But the number of jobless benefit claimants unexpectedly fell by 10,100 in December, another sign of the overall resilience in the jobs market.

The growth in wages will be noted by the Bank of England. Policymakers have said they will not be rushed into an interest rate hike by rising inflation because they expect the pick-up in prices will be driven by temporary effects from the fall in the pound after June’s vote to leave the European Union.

“The Bank has already tacked back from a dovish spin on their policy to a more nuanced interpretation of the outlook,” David Tinsley, an economist with Exane BNP Paribas, said.

“But if this week’s trends of higher inflation and higher pay growth continue, it will have to sharpen that rhetoric up further. This can provide support for sterling even as the Brexit uncertainty swirls.”

BoE Governor Mark Carney said on Monday he would keep a close eye on how British consumers cope this year, when higher inflation is expected to outpace wage growth. The BoE is due to update its forecasts for the economy on Feb. 2.

Inflation hit its highest level since mid-2014 in December at 1.6 percent, data showed on Tuesday. Many economists say it will climb toward 3 percent during this year, reflecting the fall in the value of the pound since the Brexit vote.

The ONS said workers’ total earnings in the September-November period rose by an annual 2.8 percent, the fastest pace since September 2015 and above all forecasts in a Reuters poll.

Excluding bonuses, earnings rose by 2.7 percent year-on-year, the strongest increase since August 2015 and ahead of expectations for a 2.6 percent rise.

The growth in wages in Wednesday’s data was a possible reflection of shortages of workers reported by employers in several sectors with the unemployment rate so low.

Prime Minister Theresa May said on Tuesday she wanted to control the number of migrant workers coming to Britain, something many employers fear will add to their recruitment problems.


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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell