The latest evidence that the upward momentum in pay growth is easing follows last week's decision to cut interest rates by a quarter point by the Bank of England's monetary policy committee.
The Bank's statement explaining the move referred to signs that the jobs market had stopped getting tighter.
A separate survey from research group NTC at the end of last week found a marked slowdown in pay growth in December.
NTC said its findings had been sent to the Bank of England ahead of the monetary policy committee meeting last week.
The fresh confirmation from IDS of a slowdown in the pace at which earnings are rising will be taken as further vindication of the interest rate reduction.
Of the 105 settlements covering 406,000 employees monitored in December, 51 were between 3 per cent and 3.9 per cent, and the bulk of these were in the lower half of the range. Just 14 deals awarded increases of more than 4.5 per cent.
The report notes that settlements have remained broadly stable for the past 12 months, even though headline inflation drifted down from a peak of 4.2 per cent in May to 3 per cent in November. Most settlements during 1998 therefore ran well ahead of inflation.
However, the turnaround in optimism about the economy is starting to have an impact on pay negotiations.
For example, according to the Engineering Employers' Federation, the average level of settlements dropped to 2.7 per cent in the three months to November from 3.2 per cent in the previous three month period.
Official figures for unemployment due on Wednesday are expected to show a rise of 10,000-20,000 in the number of benefit claimants last month. This would follow a small increase of 5,900 in November.
The official figures on average earnings are currently suspended subject to an independent review following startling revisions. They are not expected to be ready in time for this week's jobs market data.Reuse content