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UK earnings growth slows sharply, even as unemployment falls again

The pay of workers in Britain grew at its slowest in pace since early 2015 in the three months to October, official data showed, even as strong job creation pushed down the unemployment rate.

The mixed signals from the labour market underscored one of the reasons why the Bank of England is in no hurry to raise interest rates with inflation only just above zero and little sign of a pickup in price pressure from rising wages.

Britain's unemployment rate unexpectedly fell to 5.2 percent from 5.3 percent in the three months to September, hitting a new seven-year low, the Office for National Statistics also said on Wednesday.

Joblessness had been expected to remain at 5.3 percent, according to the median forecast in a Reuters poll of economists.

But said the regular earnings of workers -- excluding bonuses -- rose by just 2.0 percent in the three months to October, its slowest since the three months to February and weaker than a forecast of 2.3 percent in the Reuters poll.

Including bonuses, earnings also slowed with growth of 2.4 percent down from 3.0 percent in the three months to September, the ONS said.

A Range Rover Sport SUV on the production line at car manufacturing plant in Solihull, U.K.
Chris Ratcliffe | Bloomberg | Getty Images
A Range Rover Sport SUV on the production line at car manufacturing plant in Solihull, U.K.

Bank of England Governor Mark Carney has said he would like to see earnings growth moving above 3 percent a year before he would support a rate hike.

The BoE's chief economist Andy Haldane has warned that growth in earnings in Britain appears to be fizzling out.

In the United States, by contrast, strong U.S. jobs numbers have added to expectations that the Federal Reserve will raise interest rates later on Wednesday.

In the month of October alone, regular wages rose by 1.7 percent, the slowest increase since January.

The ONS said the number of people in employment rose by the biggest amount since the three months to February, jumping by 207,000 and taking the employment rate to 73.9 percent, the highest since records began in 1971.

The number of unemployed people fell by 110,000, the biggest fall since the three months to September of last year.

For most of the period since the financial crisis, average earnings in Britain lagged inflation. But more recently, the tables turned with wages picking up and inflation falling to around zero.

However, wage growth remains below levels of before the downturn and, combined with a weaker outlook for inflation, the slowdown in pay has lowered expectations of the BoE raising rates any time soon.

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