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UK pay growth hits 4% for first time since 2008 but hiring slows

LONDON (Reuters) - Britain’s workers received their biggest pay rises in more than 11 years this summer as the unemployment rate fell back to its lowest since the mid-1970s, official data showed on Tuesday

But there were some signs of nervousness among employers as the latest deadline for Brexit approached. Hiring was weaker than expected by economists and vacancies fell to their lowest level since the end of 2017.

The Office for National Statistics said total earnings growth, including bonuses, rose by an annual 4.0% in the three months to July, up from 3.8% in the three months to June for its strongest increase since mid-2008.

Pay growth is watched closely by the Bank of England to gauge future inflation pressures, and the latest increase was stronger than all forecasts in a Reuters poll of economists.

“Once adjusted for inflation, they have now gone above 2% for the first time in nearly four years,” ONS statistician David Freeman said.

Excluding bonuses, which smooths out some volatility, pay growth slipped back to 3.8%, in line with a Reuters poll forecast.

The unemployment rate fell to 3.8%, back to its joint lowest since the three months to January 1975.

But job creation was lower than expected at 31,000, weaker than the median forecast of 53,000 in the Reuters poll.

Vacancies fell too, hitting their lowest level since late 2017 at 812,000.

Britain’s economy contracted in the second quarter, raising the prospect of a recession before the country leaves the European Union, although that risk diminished after data on Monday showed a stronger than expected recovery in the month of July.

The labour market has proven surprisingly strong since the Brexit referendum in June 2016, something many economists attribute, in part, to employers hiring workers that they can later lay off rather than making longer-term commitments to investment.

However, some recent surveys of companies have suggested employers are turning more cautious about hiring as Britain approaches its new Brexit deadline of Oct. 31.

A survey published week showed the number of workers hired for permanent jobs via recruitment agencies in Britain fell at the fastest pace in more than three years in August as the Brexit crisis deepened.

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