Wage growth in the U.K. is starting to gain momentum amid a tight labor market, though the pace of increases may be gradual, according to Bank of England Chief Economist Andy Haldane.
"A year on, I think there is more compelling evidence of a new dawn breaking for pay growth, albeit with the light filtering through only slowly," Haldane said in a speech in London on Oct. 10.
Average weekly earnings, excluding bonuses, went up 2.9% in the three months to July, up from a 2.7% increase in the three months to June and stronger than the BoE's monetary policy committee had expected in August. Private-sector pay growth also recently hit the "psychologically important" 3% threshold, Haldane said.
The central bank expects the rise in wages to be limited and gradual, with private-sector pay seen rising to about 3.75% in three years' time.
"With wage growth picking up for the first time in a lost decade, the risks to domestic costs are now broadly-balanced, though still significant," Haldane said. He also cited trends in automation and less business competition as risks to wage growth.