*
Basic pay growth slows for first time in a year
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BoE watching labour market inflation pressure
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Investors see 40% chance of rate hike pause next week
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Jobless rate unchanged at 3.7%
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But vacancies and inactivity rate fall
(Adds background, fresh comment from economist)
By William Schomberg and Sachin Ravikumar
LONDON, March 14 (Reuters) - Growth in pay in Britain -
which the Bank of England is watching closely as it weighs up
whether to pause its run of interest rate hikes next week - lost
pace in the three months to January, official data showed on
Tuesday.
Basic pay, excluding bonuses, rose by 6.5% compared with
6.7% in the three months to December, representing the first
slowdown in the that measure since late 2021.
Total pay grew by an annual 5.7% in the November-to-January
period, slowing from 6.0% in the previous figures and the
weakest increase since the three months to July last year, the
Office for National Statistics said.
Economists polled by Reuters had expected basic and total
earnings to rise by 6.6% and 5.7% respectively.
Britain's unemployment rate held at 3.7% in the three months
to January, close to its lowest in almost five decades, the data
also showed.
Economists polled by Reuters had mostly expected the rate to
rise to 3.8%.
The BoE is expected to raise borrowing costs on March 23 by a further quarter of a percentage point to 4.25% although investors have cut their bets on such a move sharply after the collapse of U.S. lender Silicon Valley Bank. Interest rate futures showed investors were putting the chance of the BoE pausing its rate hikes next week at about 40% at 0830 GMT while a quarter of a percentage point increase in borrowing costs was seen as a 60% possibility.
Yael Selfin, chief economist at KPMG UK, said while the ONS data showed a slowing of pay growth, more recent measures showed little change recently.
"Coupled with stronger-than-expected GDP data, this should provide enough evidence for the Bank to raise rates when it meets next week," Selfin said. But Martin Beck, with forecasters the EY ITEM Club, said a BoE rates pause was now likely after 10 back-to-back hikes. "These moves follow other developments, including an unexpectedly significant decline in the services sector inflation in January," Beck said.
Sterling rose against the dollar and the euro shortly after the data before falling back.
Finance minister Jeremy Hunt is expected to announce measures in his budget statement on Wednesday that will seek to get more people into work, easing the inflationary pressure in the labour market. "The jobs market remains strong, but inflation remains too high," finance minister Jeremy Hunt said after the data was published, a day ahead of his budget speech. "Tomorrow at the budget, I will set out how we will go further to bear down on inflation, reduce debt and grow the economy, including by helping more people back into work." Tuesday's data showed earnings were further diminished by an inflation rate that stood above 10% in January. The ONS said basic pay, when adjusted for inflation using the consumer prices index, fell by 3.5%, one of the largest falls since records began in 2001. Total pay fell by 4.4% in real terms, the biggest drop since early 2009.
There were some signs of a further easing of the tightness
in the labour market with the economic inactivity rate -
measuring people out of work and not looking for it - falling by
0.2 percentage points to 21.3%, driven mostly by young people.
Vacancies decreased for the eighth time in a row in the
three months to February, falling by 51,000 from the previous
three months to 1.124 million.
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Jobless rate unchanged Real pay slips further ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Graphic by Sumanta Sen; Editing by Kate Holton and Christina
Fincher)
