Wage growth across the UK picked up slightly in the three months to February, defying a weakening labour market and providing a fresh challenge for the Bank of England as it weighs when to start cutting interest rates.
New figures from the Office for National Statistics (ONS) show that average weekly earnings, excluding bonuses, rose by 5.9 per cent year-on-year in the December to February period—up from 5.8 per cent in the previous month. When bonuses are included, the rate held steady at 5.6 per cent. Both figures were broadly in line with economists’ expectations.
The unemployment rate remained unchanged at 4.4 per cent, but underlying labour market data points to growing slack. The number of job vacancies dropped by a further 22,000—marking a continued downward trend—and fell below pre-pandemic levels for the first time since 2021.
Meanwhile, a flash estimate for March suggests the number of payrolled employees declined by 78,000, a sharper drop than the 35,000 anticipated by analysts. It highlights mounting pressure on hiring as businesses adapt to a slowing economy and persistently high interest rates.
Despite this, pay growth remains robust by historical standards and is still well above the 2 to 3 per cent range typically consistent with the Bank of England’s 2 per cent inflation target. February’s data, however, does not yet account for recent policy changes—including the increase in employer national insurance contributions and the uplift in the national living wage, both introduced in April.
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