UK employment drops most since 2020 and wage growth cools

[LONDON] UK wages grew at the slowest pace for seven months and employment plunged, as the labour market continued to ease after Prime Minister Keir Starmer’s government ramped up the cost of hiring.

Pay growth excluding bonuses eased to 5.2 per cent in the three months through April, the least since the third quarter of last year, the Office for National Statistics said on Tuesday (Jun 10). Economists had expected 5.3 per cent on average. Private-sector wage growth – the measure watched most closely by the Bank of England – slowed to 5.1 per cent from 5.5 per cent. Vacancies fell in the three months through May.

The figures suggest firms are seeking cost savings after Labour increased payroll taxes for businesses and hiked the minimum wage in its first budget – changes that came into effect in April. That will likely ease concerns at the BOE that inflation will continue to be fuelled by higher wage growth, as officials try to contain a fresh pick-up in price pressures.

Separate tax data showed the number of employees on payroll dropped a larger-than-forecast 109,000 in May, the biggest decline since May 2020. It took the fall since the budget changes were first announced in October to 276,000. BLOOMBERG