British workers’ pay grew at its joint fastest pace in over a decade as employers extended their hiring spree, adding to signs that uncertainty about Brexit is prompting firms to take on workers rather than commit to longer-term investments.
Contrasting with other sluggish readings of Britain’s economy, total earnings, including bonuses, rose by an annual 3.5 percent in the three months to February, official data showed, in line with a Reuters poll of economists.
That was the joint highest rate since mid-2008 although in the month of February on its own the pace of wage growth slowed.
Britain’s labor market has defied the approach of Brexit, helping households whose spending drives the economy. Last week, Britain’s exit from the EU was delayed until October.
Employment grew by 179,000 in the three months to February, in line with the Reuters poll forecast, helping to keep the unemployment rate at 3.9 percent, its lowest since early 1975, the Office for National Statistics said.
However, the jobs surge could reflect nervousness among employers about Brexit and risks aggravating Britain’s long-standing productivity problem, the Achilles heel of the world’s fifth-biggest economy.
Workers can be hired and then fired if the economy takes a hit, whereas investment in technology and new machinery — which helps the economy over the long term — fell throughout 2018.
“The elongated period of uncertainty has kept businesses in a hiring cycle,” Tej Parikh, an economist at the Institute of Directors, an employers group, said.
“Without a pick-up in investment, low productivity will also keep wages from growing further, particularly when considering the higher regulatory costs businesses are facing this tax year.”
Data earlier this month showed output-per-hour rose by only 0.5 percent in 2018, well below the annual average of 2 percent before the global financial crisis.
Accountancy firm Deloitte said on Monday that large British-based businesses were increasingly focused on cashflow as they worried about the long-term economic hit from Brexit.
The ONS said the increase in jobs over the past year was all coming from full-time workers, both employees and self-employed.
Average weekly earnings, excluding bonuses, rose by an annual 3.4 percent, the ONS said, in line with the Reuters poll and down from 3.5 percent in the three months to January.
It was the first fall in that measure of pay growth since the middle of last year.
The strength of the labor market is pushing up wages more quickly than the Bank of England has forecast, leading some economists to think it might move quickly to raise interest rates once the Brexit uncertainty lifts.
The BoE forecast in February that wage growth would slow to 3.0 percent by the end of 2019 with the overall economy likely to grow at its slowest pace in a decade.
Writing by William Schomberg; Editing by Peter Graff
Source: UK Reuters