UK employment rises more than forecast but wage growth slows

The UK economy continued to create jobs at a healthy pace in the three months through April but wage growth unexpectedly slowed.

The employment rate reached a record-high 75.6% after the economy added 146 000 jobs, more than the 120 000 predicted by economists. The jobless rate held at 4.2%, its lowest since 1975.

However, a surprise moderation in the pace of wage growth may suggest the economy retains a margin a spare capacity. Pay growth excluding bonuses slowed to 2.8% between February and April, the Office for National Statistics said on Tuesday.

For Bank of England policy makers, the question is how quickly the economy uses up whatever slack it has left.

Bets on an August interest-rate hike receded on Monday after manufacturing and construction failed to bounce back as forecast in April following snow disruptions the previous month.

The pound held gains following the labour-market data and was at $1.3414 as of 9:32 a.m. London time.

With inflation slowing to 2.5% on average between February and April, households enjoyed the strongest period of real wage growth for more than a year, though pay including bonuses only matched the rate of CPI.

Key month

Regular private-sector pay slowed to 2.9% in the latest three months, and the figure for April alone dropped sharply to 2.5%, the least in five months.

April is a significant month for wage settlements as it marks the start of the new financial year for many private- sector firms as well as the government, which employs more than 5 million workers and sets the statutory minimum wage.

In the public sector, the government is relaxing seven years of pay restraint. However, only a handful of settlements will have been included in the April data, which showed pay growth staying at 2.5%.