Britain's unemployment rate edged up to 3.7% in three months to October, however, basic wages increased by the most on record excluding the coronavirus pandemic period, the Office for National Statistics (ONS) said on Tuesday.
The Bank of England (BoE) is watching pay growth closely as it tries to assess the risks of long-term inflation problems in Britain coming from the country's tight labor market, and as it sets to raise interest rates for the ninth consecutive meeting on Thursday.
Vacancies in the September-to-November period fell annually for the first time since early 2021 when Britain was under lockdown.
But regular pay rose by a stronger-than-expected 6.1% in the August-to-October period, the biggest increase since records began in 2001 excluding jumps during the COVID-19 period, which were distorted by lockdowns and government support measures.
Total pay including bonuses also increased by an annual 6.1%, the ONS said.
Martin Beck, an economist with forecasters EY Item Club, said 6.2% growth in service sector wages would catch the BoE's attention but it would probably still slow the pace of its rate hikes to 50 basis points (bps) from November's 75 bps increase.
Samuel Tombs, an economist with Pantheon Macroeconomics, said he expected pay growth to slow as the weakening economy takes its toll on the job markets.
High inflation reached its 41-year peak in October and continues to squeeze wages, resulting in mass strike action of nurses, royal post workers, teachers and lecturers who will continue to take part in union walkouts across Britain till the end of December.
Sam Beckett, ONS head of economic statistics, said "the number of working days lost rose again in October, to the highest monthly level in over 10 years."
The ONS said the economic inactivity rate – or the share of people not in work and not looking for it – fell in the three months to October to 21.5%, 0.2 percentage points lower than the previous three-month period. But the rate was 1.3 percentage points higher than before the pandemic, it said.
Reacting to the data and seemingly addressing strikers who are demanding big pay rises, finance minister Jeremy Hunt said that "any action that risks embedding high prices into our economy will only prolong the pain for everyone, and stunt any prospect of long-term economic growth."
He added in a statement: "While unemployment in the U.K. remains close to historic lows, high inflation continues to plague economies around the world."
"With the (U.K.) economy likely already in recession, we expect unemployment to trend upward from the first half of next year," noted Yael Selfin, chief economist at KPMG U.K.
"Our forecast sees the unemployment rate reaching 5.6% by mid-2024, representing an increase of around 670,000 people."
