UK jobs market steadies with BoE set to keep rates on hold

By William Schomberg and Suban Abdulla

LONDON (Reuters) -The pace of British pay growth was little changed and there were others signs of stability in the jobs market, according to official data published shortly before the Bank of England was expected to keep interest rates on hold.

Private sector pay, excluding bonuses, - a key gauge for the BoE - rose by 6.1% in the three months to January, compared with the same period a year earlier, marginally slower than an increase of 6.2% at the end of 2024, Thursday's data showed.

Pay growth across the economy, excluding bonuses, stood at 5.9%, unchanged from the fourth quarter, the Office for National Statistics said. Including bonuses, pay was up 5.8%, slowing from 6.1% in January.

A Reuters poll of economists had pointed to both economy-wide measures of wage growth rising by 5.9%.

"There is nothing in this data that will shift the Bank of England away from its current thinking about the economy, with interest rates almost certainly set to remain unchanged today," Luke Bartholomew, deputy chief economist at Aberdeen, said.

The BoE is trying to gauge whether inflation pressures in the labour market are easing sufficiently for it to continue cutting interest rates. It is expected to keep rates at 4.5% at 1200 GMT on Thursday after its March meeting.

Sterling and government bond prices were little changed against the dollar after the data release.

A rise in the social security contributions that employers pay starting in April is expected to lead to slower wage growth as well as weaker hiring.

Data published on Wednesday showed pay settlements granted by British employers fell back in line with inflation for the first time since October 2023.

Separate data provided by employers to the tax authorities showed the number of employees climbed by 21,000 in February, stronger than a revised increase of 9,000 in January.

In a further sign of a stabilising jobs markets, the number of job vacancies in the December-to-February period stood at 816,000, the first increase when comparing a three-month period with the previous one, since April 2022.

Britain's unemployment rate, based on a survey that the ONS is overhauling and is no longer considered an accurate gauge, held at 4.4%.

Yael  Selfin, chief economist at KPMG UK, said the risk of an escalation in global trade tensions triggered by U.S. President Donald Trump's import tariffs on trading partners could threaten the relative stability of Britain's jobs market.

"Sentiment is likely to weaken further if global trade frictions intensify over the coming months, which could lead to a continued decline in hiring intentions and an increase in unemployment," Selfin said.

(Writing by William SchombergEditing by Rachna Uppal and Tomasz Janowski)