Fall in UK salary levels fuels hopes of future interest rate cuts

Average salaries in the United Kingdom fell back 0.1% to £38,765 (€45,736) from April to May, the first decline since last October, according to Adzuna’s latest jobs report. 

Although it is a small decline, a slow down in wage growth could allay fears about future rises in inflation and increase the chances of a rate cut by the Bank of England (BoE).

The Bank held rates at 5.25% again last week but economic indicators suggest a rate cut is in the offing.

Inflation fell back to the Bank’s 2% target for the first time in three years last week, paving the way for a rate cut as soon as August. 

Job vacancies flatten

Adzuna’s monthly jobs report gives a snapshot of UK job vacancies. The company supplies its real time data to the Cabinet Office and Office for National Statistics labour market indices.

Job vacancies were generally flat from April to May, rising by just 77 vacancies to 854,248.

The figure was 18.7% below May last year, signalling fewer job openings and more normal pay growth, which will ease concerns among the BoE’s policymakers that the labour market is still running too hot.

Adzuna co-founder Andrew Hunter told the Daily Telegraph that the fall in salaries was “pointing to a slightly less tight labour market”.

He went on: “The UK job market has been met with resistance in the past few months but the upcoming general election may have the potential to salvage the situation. Any outcome is likely to move the needle on the sluggish job market, with both the Conservative and Labour parties pledging to create more jobs.”

Jobs in the legal and travel sectors were the worst hit, with salaries declining 1.5% and 1.2% respectively. 

Unemployment in the United Kingdom recently reached 4.4%, its highest level in two and a half years.