UK wage growth hits six-month high, but expectations for a rate cut by the Bank of England are rising.

Despite a decrease in the number of employed people in the weeks following the salary tax increase in the Labor Party's first budget, the wage growth rate in the UK unexpectedly rose to its highest level in six months. The UK's Office for National Statistics said on Tuesday that in the three months leading up to November, wages excluding bonuses increased by 5.6% year-on-year, higher than the previous month's 5.2%. This data slightly exceeded economists' general expectations of a 5.5% increase, but analysts pointed out that strong underlying data effects raised this number. The economic indicator most closely monitored by the Bank of Englandnamely wage growth in the private sectoraccelerated from 5.5% to 6%. However, there are significant signals indicating that there are further signs of loosening in the UK labor market following the announcement of the latest budget by UK Chancellor of the Exchequer Rachel Reeves in October. Based on data from UK tax records, employment in the UK decreased by 47,000 in December, falling to the lowest level in over a year. This marks the second consecutive month of decline, raising concerns that the Labor Party's proposed 26 billion (approximately $31.9 billion) increase in employer national insurance contributions is leading to significant job cuts. Since the announcement of the Labor Party's budget, UK employers have laid off 79,000 people. Another sign of economic weakness is that the number of job vacancies in the UK decreased by 24,000 to 812,000 in the three months leading up to December, marking a continuous decline for 30 months. Unemployment rate also rose slightly from 4.3% in the three months leading up to October to 4.4% in the three months leading up to November. However, UK central bank officials remain cautious about the accuracy of UK unemployment data. Following the release of the latest wage data, the pound sterling's decline against the US dollar narrowed by 0.4% to $1.2284. Meanwhile, traders slightly raised their expectations of interest rate cuts by the Bank of England after the wage data release, in line with the expected trends for other major central banks such as the Fed in the futures market. The market is currently pricing in a cut of around 63 basis points by the Bank of England, indicating a likelihood of more than 50% of three rate cuts, with two cuts of 25 basis points each and the possibility of a third cut. The time between the release of this data and the Bank of England's decision on whether to continue cutting interest rates is just over two weeks, and the state of the labor market is crucial to the Bank of England's decision on interest rate cuts. Concerns about persistent inflationary pressure have prompted the Bank of England to ease monetary policy only twice since August, lagging behind central banks in the Eurozone and the US. As wage growth continues to outpace inflation, UK households have seen their wage growth, adjusted for inflation, reach its highest level since August 2021. In the three months leading up to November, real wage growth rebounded to 3.4%. Bank of England Governor Andrew Bailey hinted at taking "cautious" further easing measures. However, central bank officials have taken a cautious stance on the recent rise in wage growth, citing surveys showing that the UK labor market is cooling due to economic weakness. "Given the resistance in the labor market, the rise in wage growth is expected to be very temporary," said Yael Selfin, Chief Economist at KPMG UK. She pointed out the rise in unemployment rate and stated that the rise in wage growth was "mainly due to base effects." "Against the backdrop of macroeconomic slowdown in labor market activity, we expect wage growth to trend downward over the next year." Some analysts believe that the recent surge in UK domestic wage data is largely due to relatively strong year-on-year wage growth in September and October last year. However, the labor market statistics for November show a clear slowdown in wage growth. The latest labor market data also shows that the number of economically inactive people (those who are unemployed and not actively seeking work) decreased by 54,000 to 9.3 million. However, the number of long-term sick individuals increased by 21,000 to 2.8 million. The UK Office for National Statistics cautioned that these data should be treated with caution due to the current incomplete reliability of the data.