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UK pay rises more than expected, unemployment rate stable

[LONDON] British workers' total pay grew more than expected to hit its fastest rate in nearly four years in the three months to April, official data showed on Wednesday, a latest sign of a recovery in living standards.

The Office for National Statistics also said Britain's unemployment rate held stable at 5.5 per cent, holding at its lowest level since 2008.

The number of people in employment rose by 114,000 in the three months to April, slowing as the country headed for what looked at the time like being a knife-edge election on May 7.

In the end, the Conservative Party of Prime Minister David Cameron won the election with an unexpected parliamentary majority, reducing uncertainty about the political outlook.

The rise in employment took the number of people in work to 31.05 million.

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Total average weekly earnings in the three months to April, including bonuses, rose by 2.7 per cent compared with the same period a year earlier, speeding up from 2.3 per cent year-on-year growth in the three months to March.

Excluding bonuses, pay picked up similar speed.

Economists taking part in a Reuters poll had forecast total earnings would rise by 2.1 per cent and that earnings excluding bonuses would increase by 2.5 per cent.

Inflation, as measured by the consumer prices index, sank below zero in April, falling by 0.1 per cent compared with the same month, before rising to 0.1 per cent in May.

The combination of rising earnings and near-zero inflation is boosting the spending power of households, which saw their real income hurt by five years of almost uninterrupted sub-inflation pay growth.

The Bank of England is keeping a close eye on wages as it considers when to start raising interest rates from their record low of 0.5 per cent. Minutes from its latest policy meeting were due to be published at the same time as the ONS data.

Last month, the BoE cut its forecast for wage growth to 2.5 per cent in 2015 from a previous forecast of 3.5 per cent.

The ONS data released on Wednesday showed that in April alone pay, including bonuses, rose by 2.6 per cent on the year, compared with a revised increase of 4.4 per cent in March, a five-year high for that measure.

Excluding bonuses, pay rose by 2.9 per cent in the month of April.

The number of unemployed people fell by 43,000 to 1.813 million.

The number of people claiming Britain's Jobseeker's Allowance, its main unemployment benefit, and unemployed people claiming the new Universal Credit, fell by 6,500 in May, compared with a fall of 7,800 in April.

The ONS made the combined measure of jobless benefit claims its main gauge of unemployment benefits starting from Wednesday.

The old measure, based only on the Jobseeker's Allowance benefits, showed claims fell by 15,700 in May.


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