British annual earnings growth unexpectedly slowed in October even though the jobless rate stood at a 32-year low last month, in a sign that a very tight labour market is still not feeding inflationary wage demands.
The Office for National Statistics said today headline average earnings rose 4 per cent on the year in the three months to October, easing from 4.1 per cent in September and below forecasts for a rise of 4.2 per cent.
The number of people claiming jobless benefits fell by more than twice the rate expected in November, by 11,100, taking the total down to 813,000 - the lowest since June 1975. The rate held at 2.5 per cent, the weakest since April 1975.
While the figures show little immediate danger of inflationary pay growth, the continuing tightness in the labour market will keep hawks on the Bank of England's Monetary Policy Committee focused on the New Year wage round.
"It's an encouraging combination of lower unemployment and weaker earnings growth, but I am not sure how long it can be sustained," said George Buckley, an economist at Deutsche Bank.
The central bank cut interest rates by 25 basis points to 5.5 per cent last week to help shore up the economy in the wake of the global credit crunch, given fears over the chances of a prolonged slowdown.
But policymakers have been vocal about inflationary pressures bubbling away under the surface, despite expectations for further rate cuts. Factory gate inflation is at a 16-year high and oil and some food costs have soared this year.
For now, it appears that wage growth is unlikely to add to those worries. Earnings growth in the manufacturing sector crumbled to 2.5 per cent - a record low - as last year's bonus payments were not repeated.
Services sector pay growth, however, picked up slightly to a rate of 4.4 per cent, the highest since March.