UK wages pick up with fewer foreign nationals in the workforce

Average weekly earnings excluding bonuses rose 2.5% from a year earlier, the most since December 2016, the Office for National Statistics said on Wednesday. The overall employment rate rose to 75.2%, close to a record.

The figures may be welcomed by those supporting the UK leaving the European Union who had complained that open immigration undermined locals. They may also fuel speculation that the Bank of England could raise interest rates again as early as May after policy makers said the Brexit vote had lowered the pace the economy can grow without fanning inflation.

“Rising employment this past year was largely driven by UK nationals” as fewer eastern Europeans were working than a year earlier, ONS statistician Matt Hughes said. “These figures simply look at the number of people in work and aren’t a measure of migration.”

UK pay growth is still slower than inflation, which is running at 3%. The unemployment rate also rose to 4.4% as fewer workers were economically inactive. Private- sector pay gains accelerated to 2.6% from 2.5%.

BOE policy makers estimate there is little slack left in the economy, with surveys suggesting recruitment difficulties are forcing some firms to raise wages. Central-bank forecasts show unemployment averaging 4.2% in the coming quarters, below the 4.25% rate officials say the economy can sustain without generating inflationary pressure.

The outlook for rates depends on whether any pickup in wages is matched by productivity improvements, and there were some positive signs in the latest data.

Output per hour gained 0.8% in the fourth quarter following a 0.9% gain in the previous three months, which was the most in six years.

Figures on Thursday are expected to confirm that the economy grew 0.5% during the period.