LONDON (Reuters) - British wage growth fell to a three-month low in June and rapid gains in employment seen over the past couple of years ground to a halt, official figures showed Wednesday, reinforcing the view that the Bank of England is in no rush to raise interest rates.
Headline annual earnings growth fell sharply to 2.4 percent in the three months to June from 3.2 percent in the three months to May, the Office for National Statistics said, after a fall in bonuses took a bigger toll than economists had forecast.
The ONS said the figures strengthen the possibility that “the jobs market is levelling off”, while economists had mixed views, with some seeing weakness while others pointed to a stronger underlying picture for wages and productivity.
The unemployment rate held steady at 5.6 percent after an unexpected rise in the three months to May, while the total number of people in work was 63,000 lower than the near-record level of 31.1 million reached in the first three months of 2015.
Sterling hit a one-month low versus the euro after the data and British yields fell as traders viewed the data as further reducing the chance of any BoE action on rates in 2015.
“The latest UK labour market figures showing a fall in employment and weaker wage growth support the consensus view on the Monetary Policy Committee that interest rates do not need to rise before the end of the year,” Samuel Tombs, an economist at Capital Economics, said.
Markets pushed back expectations for an interest rate rise in Britain last week after only one Bank of England official voted for a rise in borrowing costs against expectations that two or more would do so.
With inflation at zero and a strong pound keeping price pressures in check, the BoE is closely eyeing Britain’s labour market as it judges when to raise interest rates for the first time since the start of the financial crisis in 2008.
The nearly 12 percent drop in bonuses in June — the largest in more than a year — reflected one big company having lower bonuses than in the previous year and another changing the timing of pay-outs, the ONS said.
Excluding bonuses, average weekly earnings growth held steady at 2.8 percent in the three months to June as expected. This rate was last higher in early 2009.
A forward-looking indicator of unemployment, the number of people claiming jobless benefits, dropped by 4,900 in July, and the ONS heavily revised down a rise it had reported for June.
“Today’s figures do not shift our views on monetary policy prospects,” Philip Shaw, an economist at Investec, said.
“A run of several months of falling employment ... might well cause the MPC to have second thoughts about the timing of the first rate increase, but we remain unconvinced that the tone of the past couple of reports will be maintained.”
Editing by Robin Pomeroy