UK 3 months to Feb headline average earnings highest since March 2004 UPDATE

UK 3 months to Feb headline average earnings highest since March 2004 UPDATE

	Published : Wed, 18 Apr 2007 10:00 By : Agencies Print this Story

(adds detail on claimant count, manufacturing sector)

LONDON (Thomson Financial) - Higher bonuses payments pushed up headline average earnings growth to its highest level in nearly three years, while unemployment as measured by the claimant count fell for the sixth month in a row.

The Office for National Statistics said average earnings growth including bonuses jumped to 4.6 pct in the three months to February from the year earlier after a 4.2 pct rise in January.

This is well above analysts' expectations for a 4.2 pct increase and marks the highest growth since January 2004, the ONS said, adding that it was largely due to bonus payments in the financial sector, as well as other sectors such as retail and wholesale.

The figure will cause concern among rate-setters at the Bank of England as the rate now stands above the 4.5 pct that is thought to stoke inflationary pressures in the wider economy and will further cement expectations that interest rates will rise again next month, particularly after yesterday's strong inflation numbers.

The central bank has repeatedly expressed concern that previous rises in energy costs would feed through into wage settlements.

Nevertheless, rate-setters will be relieved that average earnings growth without including the bonus element remained very subdued.

Earnings growth excluding bonuses was 3.6 pct in the three months to February, unchanged from the period to January and slightly below forecasts for a slight uptick to 3.7 pct.

Elsewhere in today's labour market report, the statistics office said the number of Britons claiming the jobseeker's allowance fell for the sixth month in a row.

The claimant count during the month dropped by 9,200 in March to 910,800 after a 3,100 fall in February, revised from the previous estimate of a 3,800 fall. From the same month a year ago, the claimant count is down 28,000.

This is the first time since the six months to February 2005 that the claimant count has fallen for six consecutive months and may stoke further concerns on the Monetary Policy Committee that there is very little slack in the economy.

However, the wider ILO measure of unemployment showed a rise during the three months to February of 21,000 on the previous three months and of 120,000 on the year, following falls in recent months. This is the biggest rise since July to September 2006.

The ILO unemployment rate stood at 5.5 pct in the three months to February.

Elsewhere in the release, the statistics office said the employment rate was 74.3 pct in the three months to February.

Total employment over the three months fell by 47,000 from the previous three months to 28.98 mln, but was up 147,000 on a year earlier.

Meanwhile, the figures showed the manufacturing sector continued to shed jobs, losing 54,000 employees over the three months to February from a year earlier to 2.97 mln, the lowest figure since comparable records began in 1978.

Manufacturing productivity rose, however, by 4.1 pct in the three months to February from a year earlier while unit wage costs fell by 0.6 pct.

jessica.mortimer@thomson.com

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