Ashley Webb, an economist at Capital Economics, said the labor market is likely to cool, but Tuesday’s data suggested it would still keep the inflationary heat in the economy for a few more months.
“And given that activity ending last year was a little stronger than the Bank expected, we think the Bank of England could have one or two more rate hikes in the pipeline,” Webb said.
Despite the faster-than-usual pace of wage growth, workers are seeing their incomes eroded by inflation, which remains above 10%.
unemployment remains low
Total wages, adjusted for the consumer price index targeted by the BoE, fell 4.3% in the last three months of 2022 compared to the same period in 2021, the biggest decline since early 2009.
The unemployment rate stood at 3.7% in the three months to December, in line with a Reuters poll and not above its lowest level in nearly 50 years.
But there were signs of further weakness in the labor market.
Vacancies fell for the seventh time in a row by 76,000 to 1.134 million in the November-to-January period.
And the economic inactivity rate – or the share of people not in work and not looking for it – fell to 21.4% in the three months to December, down 0.3 percentage points from the previous three-month period.