Official labour market statistics show regular pay - wages excluding bonuses - rose 3.4% on the year in the three months to April, with the unemployment rate recorded at 4.9%.
Those figures were released hours before the Bank of England was due to set interest rates. Economists polled ahead of the data had forecast a 3.2% increase in wages and a 5.0% jobless rate, leaving the outturn as a modestly stronger reading for pay and slightly firmer employment than expected.
Central bank focus
The Bank of England is watching the labour market closely to assess whether higher oil prices, attributed in the data commentary to developments tied to the Iran conflict, will translate into larger wage increases. At the same time, most policy makers are reported to view the current state of the job market as weaker than in recent years, a judgment that, if sustained, would make very large pay rises less likely.
Policy consensus ahead of the decision pointed to the central bank leaving interest rates unchanged at 3.75% later on the day.
Historical context cited by policymakers
The central bank has cited the period following Russia's full-scale invasion of Ukraine in 2022 as a defining episode for recent inflation dynamics. During that period, consumer price inflation peaked at 11.1% and wage growth remained above 5% for nearly three years - a stretch that policymakers say complicated efforts to return inflation to the 2% objective.
Against this backdrop, the Bank of England judges that wage growth substantially above 3% presents a challenge for achieving 2% inflation on a lasting basis, given persistently weak productivity growth.
What the numbers show
- Regular pay growth (excluding bonuses): 3.4% year-on-year in the three months to April.
- Unemployment rate: 4.9%.
- Economists' forecasts: 3.2% wage growth; 5.0% unemployment.
- Bank of England policy rate expected to remain at 3.75%.
These data points feed directly into the central bank's assessment of inflationary pressure and the likely path for monetary policy.