UK pay growth beats expectations before BoE decision

British wages grew faster than expected in the three months to April, with average weekly earnings excluding bonuses rising at an annual rate of 3.4%, and unemployment falling to 4.9%.

British wages grew faster than expected in the three months to April and unemployment fell, according to official data which paint a somewhat stronger picture of the job market, hours before the Bank ‌of England announces its interest rate decision. Average weekly earnings growth excluding bonuses held at an annual rate of 3.4%, the Office for National Statistics said on Thursday, rather than falling to a fresh five-year low of 3.2% as economists had expected in a Reuters poll.

The jobless rate unexpectedly dipped from 5.0% to 4.9%, its joint-lowest since the middle of last year. The BoE is closely watching Britain's ‌job market to see if higher oil prices caused by the Iran war trigger bigger wage rises, or if demand for workers is too weak for people to be able to ‌bargain for higher pay.

The central bank is widely expected to keep interest rates on hold at 3.75% later on Thursday, probably with a 7-2 vote, and most policymakers think the job market now is weaker than in recent years, making outsize wage rises less likely. But Thursday's data may help convince one or two Monetary Policy Committee members to back a call for higher rates, despite lower than expected inflation data on Wednesday. "The fact that wage growth came ⁠in a ​bit stronger today will certainly interest the hawks on ⁠the Monetary Policy Committee, but we think it is unlikely the Bank delivers the same kind of hawkish message as the U.S. Fed last night," Luke Bartholomew, deputy chief economist at fund managers Aberdeen, said. WAGE GROWTH IS ONE FACTOR ⁠BEHIND STICKY UK INFLATION After Russia's full-scale invasion of Ukraine in 2022, inflation peaked at 11.1% and wage growth spent nearly three years above 5%, contributing to the BoE's difficulty getting inflation back to its 2% ​target.

The central bank judges that wage growth much above 3% makes it hard to achieve 2% inflation on a lasting basis due to persistently weak productivity growth. The unemployment data ⁠is based on an ONS survey which has suffered from low response rates in recent years, making trends harder to read, though the ONS says the latest surveys now have response rates close to their pre-pandemic levels. Alternative ONS data, based ⁠on ​tax office figures, showed the number of workers on company payrolls rose by 2,000 in May. This data is often heavily revised and the initial drop of 100,000 reported for April - the biggest since May 2020 - was revised down to 53,000.

However, job vacancies in the three months to May fell to their lowest since early 2021 tO 707,000, down from a peak ⁠of around 1.3 million in 2022 when the labour market was tightest. And below the surface, some of the wage data is less robust than at first glance.

While total pay growth was ⁠its joint-highest since late 2025 at 4.4% in ⁠the three months to April - beating forecasts of a 4.0% rise - that reflected larger bonuses in the financial services sector and the earlier timing of annual pay increases for some health workers. Private-sector annual wage growth excluding bonuses - watched closely by the BoE - slowed to 2.9% in the three ‌months to April from 3.1% in ‌the three months to March, the smallest rise since late 2020.