"Pay growth remained elevated in February, increasing to 5.9%. However, the short-term impact of the rise in labour costs which came into effect in April, will likely put downward pressure on pay over the coming months.
“Forward looking evidence from the KPMG REC survey shows starting salaries remaining close to a four-year low, while firms are also reporting a fall in long term pay settlement expectations. We expect pay growth to moderate this year, with vacancies continuing to decline coupled with a marked improvement in staff availability.
“Unemployment remained steady at 4.4% although we expect weaker activity in the domestic economy to slowly filter through to the labour market. With businesses operating under a backdrop of significant uncertainty, hiring activity is likely to remain subdued this year. We expect unemployment to gradually rise and average 4.6% this year.
“Today’s strong pay growth data will provide the Bank of England with a conundrum ahead of its meeting next month. With pay growth still running above levels consistent with the inflation target, the MPC will likely continue its gradual approach to cutting interest rates. However, that will be set against growing risks to the domestic economy which are likely to depress labour market activity over the coming year.”
