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An unnamed large employer’s late supply of earnings information to the UK statistics agency risks skewing the country’s main official measure of wage growth, raising doubts about data that guides monetary policy.
The Office for National Statistics said in a little-noticed footnote to its release of earnings figures last week that “as an exception”, it was working on revisions that could go further back in time than usual, “to allow for late and updated returns we received from one business to be included, as part of improving the quality of these estimates”.
Including the mystery employer could have “a small impact at whole-economy level”, the ONS said, as the agency promised a full explanation when it published the revisions.
The earnings figures issued by the ONS are based on a survey of businesses, and are closely watched by the Bank of England when taking interest rate decisions.
The ONS also said last week it was reviewing the way it adjusts earnings figures to account for seasonal fluctuations — an exercise it conducts periodically — and that “if required” it would implement revisions to its entire historical series of wage data in “the early part of 2025”.
The revisions are potentially important because the strength of UK wage growth on almost any measure has been a puzzle for analysts, at a time when the economy and jobs market are stagnant.
The latest ONS figures showed average weekly earnings — excluding bonuses — were 5.9 per cent higher in the three months to January than one year earlier.
Private sector wage growth was running even higher, at 6.1 per cent, after apparently accelerating at the end of 2024, even as employers cut back on hiring after tax rises on businesses outlined in chancellor Rachel Reeves’ October Budget.
The BoE, which has become increasingly vocal about its concerns over the quality of the UK’s official statistics, drew attention last week to discrepancies between the ONS earnings figures and other data that suggested pay growth, while still strong, had been easing.
The BoE also focused attention on recent volatility in GDP data, ongoing problems with official labour market data and “the importance for policymaking of high-quality and reliable official data across the full range of economic and labour market statistics”.
The earnings figures have not been affected by a drop in response rates by households to the ONS labour force survey that underpins the jobs data.
But Andrew Goodwin, chief UK economist at the consultancy Oxford Economics, said that on top of well-publicised issues with jobs, population, trade and price data, other problems with ONS statistics were emerging “that are yet to be officially acknowledged”.
These included “extreme” swings in retail sales figures around the turn of the year, and an emerging pattern of GDP growth tailing off in the middle of the calendar year, which suggested problems with seasonal adjustments, he claimed.
Goodwin said the earnings figures are “arguably the most important series for the Bank of England”, as they offer an indicator of inflationary pressures in the economy.
The ONS, which first flagged the potential revisions in February, said it could not yet be more precise about when they would be implemented, or identify the employer concerned.
However, the agency noted that both its survey-based data and separate figures based on tax records showed similar, “relatively strong” wage growth.
The ONS said it regularly reviewed its approach to seasonal adjustments as new data became available, and that one-off impacts such as the Covid pandemic “need to be carefully considered and accounted for in any detailed analysis”.
