The UK labour market statistics released today show that wage growth accelerated a bit further in May. Average weekly earnings excluding bonuses (three-month average) increased to 2.8% y/y in May from 2.7% y/y in April. This was a bit weaker than expected by most analysts (consensus: 3.0% y/y) but in our view one should not put too much weight on this as the average weekly earnings figures are very volatile. Wage growth is at its highest level since February 2009 . Wage growth in the private sector is at 3.3% y/y.
The combination of increasing wage growth and very low inflation implies increasing real wage growth, which is at its highest level since September 2007 . As inflation is mainly low due to the drop in energy and food prices, this supports private consumption and thus the UK recovery.
There are signs that the improvement in the labour market has eased off recently . Against expectation the unemployment rate (3M) increased to 5.6% in May from 5.5% in April due to lower employment. In the three months to May employment declined by 67,000 compared to the three months to February. It is the first time since March 2013 and only the fifth time since the end of 2011 that employment has declined. The number of unemployed people increased by 15,000 as the size of the labour force fell.
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