By Ed Frankl

The U.K.'s labor market cooled in the three months to April, offering reassurance to Bank of England policymakers despite the level still being well above that required to return inflation to target any time soon.

Average weekly earnings excluding bonuses rose 5.2% from a year earlier, down from 5.5% in the three months to March, the Office for National Statistics said Tuesday. The unemployment rate edged up to 4.6% from 4.4%, the highest since May-July 2021.

Economists polled by The Wall Street Journal expected pay growth of 5.3% and a 4.6% unemployment rate.

Despite the easing of wages, they remain too high for inflation to hit the BOE's 2% target. A minimum wage rise of 6.7% at the start of April likely contributed to outsized growth in wages in accommodation and food-services activities.

An increase in payroll taxes might also have given employers pause on hiring new staff. Early estimates of payrolled employees for May 2025 decreased by 109,000 on month, the ONS said.

"Feedback from our vacancies survey suggests some firms may be holding back from recruiting new workers or replacing people when they move on," ONS Director of Economic Statistics Liz McKeown said.

The weakening labor market is unlikely to be enough to sway policymakers to cut interest rates at the meeting on June 19, given the jump in inflation to 3.5% in April and deepening global uncertainty, Suren Thiru, economics director at the Institute of Chartered Accountants, said in a note to clients.

The central bank anticipates wage growth to fall to around 3.75% by the end of 2025, with inflation to hover at 3.5% in the third quarter.

"This decline in pay growth should gather pace over the summer with weaker economic conditions and elevated employment costs likely to accelerate the downward pressure on wages, aided by the longstanding problems with poor productivity," Thiru added.

Analysts are still expecting a BOE rate cut in August.

Write to Ed Frankl at edward.frankl@wsj.com

(END) Dow Jones Newswires

June 10, 2025 02:46 ET (06:46 GMT)

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