Pick-up in UK earnings growth likely to be gradual in the near term

Data released earlier today by the UK Office for National Statistics showed UK jobless rate at a decade low of 5.1% in three months to December, unchanged from the previous month and missing expectations for a reading of 5.0%. More importantly though, wage pressure continues to remain subdued at around 2%. Jobless benefits fell 14,800 to 760,200 in Jan, taking the rate to 2.2%. In Dec, the total dropped 15,200 instead of previously reported figure of -4,300.

A mixed labour market data shows continued signs of weakness in wage growth amid further tightening in the labour market. A tighter labour market had been expected to exert upward pressure on pay, but prolonged low inflation is seen as a significant factor in limiting pay awards. The pick-up in earnings growth now looks likely to be gradual in the near term at least.

"As we are yet to see significant upward wage pressures despite a tightening labour market, with surveys only suggesting further downward pressures, this continues to raise the question of whether upward nominal wage growth pressures can be expected and their magnitude." said Barclays Capital in a report