British wages grew faster than expected in the three months to April while the jobless rate fell, according to official figures which show the labour market in a stronger shape, hours before the Bank of England announces its next interest rate decision.
Average weekly earnings growth excluding bonuses held at an annual rate of 3.4% in the three months to April rather than falling to 3.2%, as economists had expected in a Reuters poll, and the jobless rate unexpectedly fell to 4.9% from 5.0%.
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, and most policymakers think that the job market now is weaker than in recent years, making outsize wage rises less likely.
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 because of persistently weak productivity growth.
The unemployment data is based on an ONS survey that has suffered from low response rates in recent years, making trends harder to read, though the ONS says that the latest surveys now have response rates close to their pre-pandemic levels.
Alternative ONS data, based on tax office figures, showed that the number of workers on company payrolls rose by 2,000 in May. This data is often heavily revised. As well, the initial drop of 100,000 reported for April - the biggest since May 2020 - was revised down to 53,000.
Job vacancies in the three months to May fell by 19,000 to 707,000, the lowest since early 2021 and down from a peak of around 1.3 million in 2022 when the labour market was tightest.
(Reporting by David Milliken and Suban Abdulla; editing by Sarah Young)
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