UK Jan bonuses lift earnings growth to 5-mth high, claimant count down UPDATE

UK Jan bonuses lift earnings growth to 5-mth high, claimant count down UPDATE

	Published : Wed, 14 Mar 2007 11:09 By : Agencies Print this Story

(Updating with analyst comment)

LONDON (AFX) - Higher bonus payments, particularly in the financial sector, pushed up headline average earnings growth in the UK in January to its highest level since August, official figures showed today.

The office of National Statistics said average earnings growth including bonuses rose to 4.2 pct in the three months to January from the year before, up from 4.0 pct in the three months to December.

January's rate was the highest since August 2006, when it was also 4.2 pct, and above analysts' expectations for a 4.0 pct rate.

Most bonus payments are paid in December and January, though January is the more common month for these payments.

When excluding bonuses, average earnings growth was more muted.

The statistics office said earnings growth slowed to 3.6 pct in the three months to January from the 3.7 pct rate recorded in the three months to December. January's rate was the lowest since September 2006's 3.5 pct and below expectations for a slight acceleration to 3.8 pct.

Today's earnings data will provide a mixed picture to the Bank of England's Monetary Policy Committee, which has repeatedly expressed concern that previous energy price rises will fuel higher wage settlements in the new year pay round. Any evidence of this would add to speculation that interest rates will rise further in the coming months.

Zaki Kada at Thomson IFR Markets pointed out that overall, the jobs data is upbeat and that the labour market is in 'continual progress'

'The jump in headline earnings will be of concern to the Bank of England. The latest data show that producer prices was strong, trade balance improved and earnings shot up, all this point towards an April hike,' he added.

Elsewhere in today's labour market report, the statistics office said the number of Britons claiming the jobseeker's allowance fell for the fifth consecutive month in February.

The claimant count during the month fell by 3,800 to 922,200.

Analysts polled by AFX News were predicting a larger 9,000 drop following January's downwardly revised 13,300 decline (previously estimated at 13,500). January's fall was the biggest for two and a half years. Over the year to February, the claimant count is down 2,800.

This is the first time since the five months to February 2005 that the claimant count has fallen for five consecutive months and may stoke further concerns on the MPC that there is very little slack in the economy. That was one of the reasons why the MPC raised its key repo rate a quarter point in January to 5.25 pct and why most analysts expect another hike in the next couple of months.

Those concerns may well be accentuated by the news that the wider ILO measure of unemployment has now fallen for four months running following 13 consecutive rises.

The statistics office revealed that unemployment on the ILO measure fell by 3,000 in the three months to January from the previous three month period.

Over the year, unemployment has risen by 151,000.

The ILO unemployment rate was unchanged at 5.5 pct from December's rate but was 0.4 percentage points higher over the year.

Elsewhere in today's release, the statistics office said the employment rate was 74.4 pct in the three months to January, down 0.1 percentage points from the previous three months and on the year.

January's rate was the lowest since March 2002, when it stood at 74.3 pct.

However, total employment rose by 18,000 over the three months and by 221,000 over the year to another record of 29.02 mln,

One area that continues to shed jobs however is manufacturing, which lost 59,000 employees over the year to January to 2.97 mln. Following revisions to back data, manufacturing employment has been below the 3 mln mark since last July.

Meanwhile, manufacturing productivity was up 4.7 pct in the three months to January from the previous year, while unit wage costs were 0.8 pct lower.

carlo.piovano@thomson.com

cp/pp/ss

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