UK pay growth slows but keeps beating inflation, dampening rate cut hopes – business live | Business

The UK property market strengthened in January, new data from estate agent Hamptons shows.

Hamptons reports that there’s been a steep fall in the number of price reductions, while the pressure on sellers to accept offers below their asking price fell as houses sold faster than a year ago.

Here’s the details:

1. In January, sellers were less likely to cut their asking price than at any time over the last eight months. 48% of homes sold in January across England & Wales had been subject to a price reduction, down from a peak of 55% in October 2023.

2. The average seller in England & Wales sold their home last month for 98.9% of their asking price, up from 98.5% in both December 2023 and January 2023.

3. 9% of homes that came onto the market in January sold within a week, up from 6% in January 2023… but lower than in January 2021 when 19% of homes sold within a week.

Aneisha Beveridge, head of research at Hamptons, said:

“The early signs in 2024 suggest that the market has firmly turned the page. Falling mortgage rates have been the primary catalyst, tempting last year’s missing movers to restart their property search. Consequently, more households were looking to buy last month than in any January over the last decade, including the start of both 2021 and 2022.

“First-time buyers and second steppers, who tend to be most reliant on mortgage finance, are at the forefront of the recovery. This injection of demand is starting to stabilise house price falls, particularly for mid to lower-priced homes, which should also improve selling conditions further up the chain as the year progresses. That said, the affordability picture is still more challenging than it was a few years ago which will keep a tight lid on price growth.”

Fears that the Middle East crisis could push up inflation may deter the Bank of England from early interest rate cuts.

And policymakers will have noted that the oil price has hit its highest level in over two weeks this morning.

Brent crude has climbed by over 1%, to as high as $82.95 per barrel, the highest since 30 January.

Analysts at SP Angel Energy say:

Crude oil prices remain elevated as Israel’s military ramp-up strikes in Gaza targeting the southern city of Rafah, with the Houthis also continuing their attacks on vessels in the Red Sea.

Today’s labour market won’t be good news for doves at the Bank of England who hope to cut UK interest rates soon, says Sanjay Raja, Deutsche Bank’s chief UK economist.

Raja points to the drop in the unemployment rate to 3.8%, from 3.9%, and the stronger-than-expected wage growth:

The jobless rate – for what it’s worth – inched lower. Wage growth was a little stickier than we anticipated. And vacancies didn’t see the drop we expected.

Overall, today’s data leans more hawkishly for an MPC looking for sufficient evidence that the labour market is cooling

He adds:

Despite the slowdown in pay growth, today’s wage data leans a little more hawkishly – the MPC was projecting private sector pay growth to slip to 6% (3m/YoY) in Dec-23. (instead, it was 6.2%, as covered at 8.12am).

It’s now all up to the inflation data (7am tomorrow) to see whether spring rate cuts could still be on the table.

Amazon workers in Coventry have gone on a three-day strike in a long-running dispute over pay.

More than 1,000 GMB union members are striking until Thursday, to coincide with Valentine’s Day tomorrow.

Staff are demanding a pay increase to £15 an hour and the right to negotiate with the company over pay and conditions.

The strike comes after the GMB accused Amazon of resorting to “union-busting” tactics at its warehouses in the Midlands, with workplace message boards telling staff: “We want to speak with you. A union wants to speak for you.”

In the City, traders have been dialling back their forecast for how many times the Bank of England will cut interest rates this year.

Reuters reports that UK rate futures now predict 69 basis points of cuts this year, or slightly less than three quarter-point rate cuts.

Previously, the City had forecast 78bps of cuts this year, meaning cuts to 4.5% by December – from 5.25% today – had been fully priced in (but aren’t any more).

Analysis: Buoyant UK labour market data belies rise in long-term sickness

Larry Elliott

On the face of it, Britain’s labour market is in rude health, but the underlying picture is less cheery, our economics editor Larry Elliott explains:

Employment rose in the final three months of 2023 and unemployment fell to 3.8%. Earnings, adjusted for inflation, rose for a sixth successive month. All are traditionally signs of strength – not an economy that may well have been in recession in the second half of last year.

Scratch beneath the surface and things look less rosy. The latest bulletin from the Office for National Statistics (ONS) reveals that one reason the jobs market is running so hot is because of a lack of workers caused by long-term ill-health. The number of people inactive for health reasons was 2.8 million by the end of 2023 – a rise of more than 200,000 on the year and a jump of 700,000 since before the Covid pandemic. In a literal sense, this is a sick economy.

The absence from the labour market of so many potential workers has consequences. There are still a high number of job vacancies, even though the economy has been flatlining for the best part of two years. While vacancies have been on a downward trend throughout this period, at 932,000 they are still above pre-Covid levels.

More here.

Pay growth slowed less than expected in December as workers continued to bid up their wages amid skills shortages and a record number of people with long-term sickness, my colleague Phillip Inman writes.

The Office for National Statistics (ONS) said annual growth in regular earnings, excluding bonuses, was 6.2% in October to December 2023, while pay rises including bonuses was 5.8%.

City economists expected average earnings in the UK to drop significantly in the three months to December to 6% excluding bonuses and 5.6% including bonuses.

The modest fall will pose a dilemma for the Bank of England, which has signalled that pay rises need to moderate before it cuts interest rates.

After wages were adjusted for inflation, the ONS said workers enjoyed a fourth month of real wage increases. Total pay rose on the year by 1.6% above the consumer prices index and regular pay rose on the year by 1.9% in October to December 2023.

More here:

There was an increase in the number of people dropping out of the labour market because they were long-term sick in October-December, and also because they were students.

The number of those classed as economically inactive in the jobs market rose to 9.3 million in the final quarter of last year, with another jump in those off work due to long-term sickness, to a record 2.8 million, up 8.4% year on year.

The number of people economically inactive because they were looking after the family or home, or temporarily sick, fell – leaving the overall inactivity rate unchanged at 21.5%.

TUC general secretary Paul Nowak says:

“These figures show how people’s lives are being held back by the government’s failure to invest in our NHS.

2.8 million people are out of work because of long-term sickness and the numbers are still rising.

“Average pay is still worth £12 a week less than before the financial crisis 16 years ago and more than a million people are on zero hours contracts. The Conservative legacy is low pay, ill health and more job insecurity.

“It’s time for change. We need a proper plan for jobs, growth and public services to get living standards rising sustainably again.”