Wage growth in the UK slowed to 4.5% between September and November, according to official figures released by the Office for National Statistics (ONS). This deceleration was largely attributed to a significant decrease in the rate of pay increases within the private sector, which reached a five-year low.

The ONS reported that the number of people on company payrolls also declined, falling by 135,000 in the three months leading up to November. This decrease was particularly noticeable in the retail and hospitality sectors, despite the approaching Christmas season, a period typically associated with increased hiring in these industries. Average wages, excluding bonuses, had previously risen by 4.6% between August and October.

While private sector pay growth cooled, public sector wages saw a notable increase. The ONS suggested this was likely due to pay rises being awarded earlier in the year compared to the previous year.

Sanjay Raja, chief UK economist at Deutsche Bank, characterized the easing of pay growth as "really encouraging" for interest rates. Speaking on the BBC's Today programme, Raja acknowledged the counterintuitive nature of this assessment, stating, "I know this sounds odd when we say lower pay growth is a good thing, but for a Bank of England that's trying..." The implication being that slower wage growth could alleviate inflationary pressures, potentially influencing the Bank of England's monetary policy decisions.

The slowdown in wage growth and the decline in employment figures present a mixed picture of the UK labor market. While easing wage pressures could be welcomed by the Bank of England in its efforts to manage inflation, the reduction in payroll numbers raises concerns about the overall health of the economy, particularly in sectors like retail and hospitality which are sensitive to consumer spending and economic fluctuations. The coming months will be crucial in determining whether these trends persist and what impact they will have on the broader economic landscape.