Britons' annual earnings growth slowed sharply in the three months to April as the boost from bonuses at the start of the year faded but unemployment is still falling fast, official figures showed today.
The Office for National Statistics (ONS) said headline average earnings growth slowed to 4.3 per cent in the three months to April from 5.2 per cent in the three months to March as January financial sector bonuses fell out of the data.
Despite the slowdown, Bank of England (BoE) policy makers are more likely to be worried that excluding bonuses, wage growth is picking up to 4.1 per cent in the three months to April from 3.9 per cent in the month before.
"The fact that the ex-bonuses numbers are picking up is an indication of the tightness in the labour market," said Mr Peter Dixon, economist at Commerzbank. "At this stage, it's very much at the forefront of the BoE's thinking."
Also, the ONS said the number of people claiming jobless benefits fell by 12,000 in May, more than double the expected decline, while April's fall was revised higher. The rate now stood at 2.8 per cent of the workforce, the same as in April and last lower only in May 1975.
The pound surged by a quarter-cent after the data as dealers bet that it made another BoE interest rate more likely. The central bank raised borrowing costs last week for the second month in a row, partly because it was worried about rising inflationary pressures from the tight labour market.
The British government's preferred ILO measure of unemployment fell by 9,000 in the three months to April.
Annual earnings growth in April alone accelerated to 4.7 per cent as bonuses in the manufacturing sector which were last year paid in March were this year moved a month forward.