Wage growth has slipped from 2.9 per cent to 2.8 per cent in the three months to April, despite unemployment rate reaching a record-high of 75.6 per cent, according to a report from the Office for National Statistics (ONS).
The news comes as the number of people in work swelled by 146,000, over 20% more than predicted by economists.
Economists had also expected wage growth to remain steady at 2.9% and as wage growth is one of the key figures the Bank of England monitors to assess the health of the UK economy, this slowdown is likely to see the MPC holding off on the interest rate rise expected in August.
John Hawksworth, Chief Economist at PwC, says: “Today’s data confirmed generally positive trends in the jobs market in recent months, with the employment rate remaining at a record high and the unemployment rate at its lowest levels since 1975.
“But average hours worked fell back somewhat in the last three months. Total hours worked actually fell slightly over this period compared to the previous three months. This helps to explain why total output growth has been relatively weak recently despite solid growth in the number of jobs.
“After increasing markedly to 2.9% in the three months to March, regular pay growth slipped back a little to 2.8% in the three months to April. But real pay growth remains in positive territory given consumer price inflation has eased to 2.4%.
“Overall, this new data does not significantly alter the big picture of a modestly growing economy combining relatively strong growth in jobs with weaker growth in productivity per worker and, linked to this, only modest real pay growth.”
Matthew Percival, CBI Head of Employment Policy, adds: “The data paints a familiar picture – strong employment growth and falling unemployment. Yet stubbornly slow pay growth means living standards remain under pressure, so doubling down on efforts to boost productivity remains critical.
“Vacancies are at a record high and access to skills and labour is a huge concern for businesses. Government could help immediately by removing all shortage occupations from the tier 2 visa cap so employers – including the NHS – can access the skills they need.
“Longer-term, it’s essential that the link between labour mobility and trade is recognised to create a truly Global Britain – and the first test will be the UK’s relationship with the EU.”
Yael Selfin, Chief Economist at KPMG UK comments:“Today’s figures show that the UK labour market continued to tighten in the three months to April despite the uneven performance of the UK economy. Employment reached record level and the proportion of people in work or looking for work remained at its peak since records began.
“The discrepancy between strong employment and more subdued output growth points at disappointing productivity performance so far this year, which may explain the moderation in earnings growth in April. And as the rise in real earnings fell to a mere 0.1%, households are likely to hold back on discretionary spending.
“While a strong labour market provides a ray of hope that businesses are still confident about the future and households’ employment opportunities remain strong, it presents a dilemma for the Bank of England, as domestic price pressures are on the rise despite a spluttering economy.”