UK wages grow at fastest pace since 2008 in tight labour market

LONDON • Britons are enjoying the strongest wage growth since the financial crisis a decade ago as the labour market tightens.

Average earnings excluding bonuses continued to increase an annual 3.3% in the three months through November and unemployment fell to 4%, matching the lowest rate since 1975, the Office for National Statistics said yesterday. Separate figures showed the budget deficit unexpectedly widened in December.

Wage growth including bonuses accelerated to 3.4% in the latest three months, the fastest pace since 2008. With earnings forecast to accelerate further, the Bank of England might normally be preparing to raise interest rates.

But with no-deal Brexit fears mounting, and inflation expected to fall below target this month, traders put the chance of a hike this year at less than 70%.

The number of people in work jumped a larger than forecast 141,000, leaving the employment rate at a record 75.8%. Job creation was driven by full-time employment. Unemployment rose 8,000 as economic inactivity fell sharply.

Pay is rising in real terms. Consumer Price Index inflation averaged 2.4% between September and November and slowed further to 2.3% in the fourth quarter, handing a boost to households still recovering from a protracted earnings squeeze.

Hanging over the outlook is a cooling world economy and Brexit, with Parliament deadlocked over the way forward less than 10 weeks before Britain is due to leave the European Union (EU).

A £3 billion (RM16.52 billion) budget deficit in December left the shortfall in the first nine months of the fiscal year at £35.9 billion — almost 2% lower than a year earlier.

Pay is rising fastest in the private sector (3.4%), but public-sector pay is catching up as austerity eases. It rose 2.9% ex bonuses in the latest three months, the most since the start of 2011.

Wage growth in November alone stood at 3.4%. Unemployment in the month fell to 3.8%, the lowest since records began in 1992.

The number of hours worked fell 0.1% after strong increases recently. Vacancies rose 10,000 in the three months through December to a joint record high of 853,000.

The budget deficit for 2018-19 as a whole is on course to come in around £31 billion, above the £25.5 billion forecast by the Office for Budget Responsibility in October. But much depends on January, the biggest month of the year for cash receipts.

Central-government revenue rose 4.3% from a year earlier in December, boosted by strong growth in income tax, corporation tax and value-added tax.

Spending jumped 5.3%, with December seeing higher net investment and net payments to the EU compared to a credit from the bloc a year ago. — Bloomberg