LONDON (Reuters) – British wages, excluding bonuses, rose at their fastest pace in nearly 11 years, official data showed on Tuesday, but there were potential signs of future weakness in jobs growth, the economy’s silver lining since the Brexit referendum.
Core earnings rose by an annual 3.6% in the three months to May, the biggest increase since mid-2008 and stronger than the median forecast of 3.5% in a Reuters poll of economists.
Including bonuses, pay growth beat all forecasts in the poll, rising to 3.4%, the Office for National Statistics said, with a change in the timing of public health workers’ pay rises accounting for a small part of the increase.
Many economists say the strength of Britain’s labour market is at least in part due to employers hiring workers who they can later lay off if needed, rather than making longer-term investment commitments ahead of Brexit.
Unemployment held at its joint lowest rate since the three months to January 1975, forcing many employers to offer higher pay to their workers whose spending has helped the economy.
“However, the booming jobs market has inevitably shown signs of losing momentum in recent months,” Tej Parikh, chief economist at the Institute of Directors.
“As more and more people have entered work, businesses have found it harder to fill vacancies, and skills shortages are now clearly evident across all sectors.”
The pick-up in pay has been noted by the Bank of England which says it might need to raise interest rates in response, assuming Britain can avoid a no-deal Brexit.
The BoE said in May it expected wage growth of 3% at the end of this year.
Tuesday’s data showed the number of people out of work fell by 51,000 to just under 1.3 million.
But the growth in employment slowed to 28,000, the weakest increase since the three months to August last year and below the forecast of an increase of 45,000 in the Reuters poll.
While there was a chunky rise in the number of self-employed workers, the number of employees fell by the most since 2011, and job vacancies dropped to their lowest in more than a year.
Some recently published surveys of companies have also suggested employers are turning more cautious about hiring as Britain approaches its new Brexit deadline of Oct. 31.
Both the contenders to be prime minister have said they would leave the EU without a transition deal if necessary, raising the prospect of a shock to the economy in just over three months’ time.
A survey published last week showed that companies were more worried about Brexit than at any time since the June 2016 vote to leave the European Union and they planned to reduce investment and hiring.