The UK labour market statistics released today show that wage growth remains solid. Average weekly earnings excluding bonuses (3M) stayed unchanged at 2.8% y/y in June (Danske Bank estimate 2.8%, consensus 2.8%). Overall, wage growth excluding bonuses increased from 2.3% in Q1 to 2.8% in Q2. Wage growth is still at the highest level since February 2009. Wage growth in the private sector was 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 low mainly because of the fall in energy and food prices, this supports private consumption and, thus, growth in the UK.
The unemployment rate (3M) in June stayed unchanged at 5.6% (Danske Bank estimate 5.6%, consensus 5.6%). This implies that the unemployment rate was slightly higher in Q2 than in Q1, when the unemployment rate was 5.5%. The higher unemployment rate in Q2 was due to a combination of lower employment and a larger labour force. Employment declined by 37,000, while the labour force increased by 63,000 in Q2. The single-month unemployment rate declined from 5.7% in May to 5.5% in June, indicating that the headline unemployment rate could decline in coming months, as the headline is measured as a three-month average.
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