UK wage growth at new decade high as employers hire in the face of #Brexit

Contrasting with other sluggish readings of Britain’s economy, total earnings, including bonuses, rose by an annual 3.5% in the three months to February, official data showed, in line with a Reuters poll of economists.

That was the joint highest rate since mid-2008 although in the month of February on its own the pace of wage growth slowed.

Britain’s labor market has defied the approach of Brexit, helping households whose spending drives the economy. Last week, Britain’s exit from the EU was delayed until October.

However, the jobs surge could reflect nervousness among employers about Brexit and risks aggravating Britain’s long-standing productivity problem, the Achilles heel of the world’s fifth-biggest economy.

Workers can be hired and then fired if the economy takes a hit, whereas investment in technology and new machinery — which helps the economy over the long term — fell throughout 2018.

“The elongated period of uncertainty has kept businesses in a hiring cycle,” Tej Parikh, an economist at the Institute of Directors, an employers group, said.

“Without a pick-up in investment, low productivity will also keep wages from growing further, particularly when considering the higher regulatory costs businesses are facing this tax year.”

Data earlier this month showed output-per-hour rose by only 0.5% in 2018, well below the annual average of 2% before the global financial crisis.

Accountancy firm Deloitte said on Monday that large British-based businesses were increasingly focused on cashflow as they worried about the long-term economic hit from Brexit.

The ONS said the increase in jobs over the past year was all coming from full-time workers, both employees and self-employed.

Average weekly earnings, excluding bonuses, rose by an annual 3.4%, the ONS said, in line with the Reuters poll and down from 3.5% in the three months to January.

It was the first fall in that measure of pay growth since the middle of last year.

The strength of the labour market is pushing up wages more quickly than the Bank of England has forecast, leading some economists to think it might move quickly to raise interest rates once the Brexit uncertainty lifts.

The BoE forecast in February that wage growth would slow to 3.0% by the end of 2019 with the overall economy likely to grow at its slowest pace in a decade.