Wage growth in the UK’s private sector slowed to its lowest pace in over five years during the three months to April, as a decline in hiring put renewed focus on the Bank of England’s (BoE) upcoming policy decisions. According to data from the Office for National Statistics (ONS), annual growth in private sector weekly earnings, excluding bonuses, decelerated to 2.9 percent, down from 3.1 percent in the three months to March.

Meanwhile, regular pay growth across the broader economy held steady at 3.4 percent, slightly surpassing expectations of 3.2 percent among analysts. The slowdown in wage growth occurred alongside a contraction in payroll employment, which fell by 0.5 percent—equivalent to 138,000 jobs—compared to the previous year. This represented an upward revision from earlier estimates. Provisional figures suggested payroll employment remained flat from April into May.

The release of the labor market data preceded a decision by the BoE’s Monetary Policy Committee to maintain interest rates at 3.75 percent. The committee highlighted persistent uncertainties stemming from the crisis in the Middle East and elevated energy costs, which continue to weigh on economic conditions. The MPC noted that a weak jobs market, combined with subdued consumer spending and diminished confidence among households and businesses, would limit firms’ ability to pass on rising input costs.

Economists expressed mixed views on the data’s implications for monetary policy. Martin Beck, chief economist at WPI Strategy, indicated that while recent revisions showed the labor market was not deteriorating as rapidly as previously feared, the overall trend remains negative with weakening employment and slower wage growth. He suggested these trends diminish the likelihood of an imminent rate hike from the BoE.

James Smith, lead economist at ING, interpreted the weaker hiring as firms responding to cost pressures by reducing workforce expansion rather than through higher wages. He added that, provided the Iran nuclear deal remains intact, the Bank could avoid further interest rate increases. Ashley Webb of Capital Economics warned that upcoming rises in consumer price inflation—driven by rising energy prices—would pose a significant challenge for policymakers, even as labor market conditions showed tentative signs of stabilization.

The ONS also reported a slight decline in the official unemployment rate, from 5.0 percent in the three months ending in March to 4.9 percent in the same period ending in April. This was attributed to increased economic inactivity, with the overall employment rate remaining unchanged. Liz McKeown, ONS director of economic statistics, pointed out that the number of new job recruits was at its lowest level in five years, while vacancies dropped to 707,000—a post-pandemic low—raising concerns about opportunities for young people entering the workforce.

In response, Work and Pensions Secretary Pat McFadden emphasised that the government is advancing major reforms aimed at improving youth employment outcomes, describing them as the most significant in a generation.