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Johannesburg - UK wages grew at their fastest pace in more than six years and the unemployment rate unexpectedly fell, suggesting inflationary pressures are building in the labour market.
Pay excluding bonuses increased an annual 2.9% in the three months through July, the most since early 2009, the Office for National Statistics said on Wednesday in London. Total pay growth also quickened to 2.9%.
The jobless rate fell to 5.5%, matching the lowest since 2008, from 5.6% in the second quarter.
With companies having to raise wages to attract workers, spare capacity in the labour market is a key metric for the Bank of England as officials consider when to end more than six years of record-low borrowing costs. For now, falling oil prices are suppressing inflation, leading economists to expect the Bank of England (BOE) will keep the benchmark rate at 0.5% until early next year.
The pound climbed after the release of the data and was 0.3% higher at $1.5383 at 9:34 a.m. London time. It strengthened 0.5% to 73.12 pence per euro.
Ten consecutive quarters of growth has left unemployment in Britain at its lowest for seven years, with only the US and Japan boasting lower rates among Group of Seven countries. The jobless rate in the euro region is 10.9%.
Wage surge
The number of people in work rose 42 000 to 31.1 million in the latest three months. There were some signs of softening, with unemployment increasing 10 000 to 1.82 million, while claims for jobless benefits rose 1 200 in August from July. The rate stayed at 2.3%.
With inflation around zero for most of this year, UK households are enjoying the first period of sustained real wage growth since the financial crisis. Adjusted for price changes, wages grew 2.9% in the latest three months, the strongest since 2002.
Total pay was bolstered by bonuses which grew 17% in July and 3.8% in the three months through July. The ONS said this was due to higher bonuses in financial and business services.
Excluding bonuses, pay growth in the private sector quickened to 3.4% in the three month period.
There were signs the jobless rate could fall further in the three months through August. Single month figures show unemployment was 5.4% in July, the lowest since 2008, and 5.5% in June.
The figures come as Federal Reserve policy makers gather this week, with economists divided over whether they will raise US interest rates for the first time in almost a decade. A decision to do so could put pressure on their British counterparts to follow suit.
BOE officials see spare capacity in the UK economy being eliminated over the next year, and economists surveyed by Bloomberg predict a quarter-point rate increase in the first quarter.
