Strong jobs growth continues as UK unemployment rate falls, but wage data show prices are rising much faster than pay packets again
Record jobs growth has pushed unemployment to a five year low, official data showed on Wednesday, although weak pay growth showed households are still feeling the squeeze on their finances, even as the economy strengthens.
The number of people in employment surged by 345,000 to a record 30.5m between February and April, according to the Office for National Statistics (ONS) . This was the biggest increase since records began in 1971, and surpassed the previous record set last month of 283,000.
Unemployment dipped by 161,000 to 2.16m, which pushed the jobless rate down to 6.6pc, from 7.2pc in the quarter to January. This represents the lowest rate of unemployment since the final quarter of 2008, when it stood at 6.4pc.
However, the data showed prices are rising faster than wages again. Average pay including bonuses grew by just 0.7pc in the three months to April, compared with 1.9pc growth in the three months to March. Between April 2013 and April 2014, the Consumer Prices Index (CPI) – the Government’s preferred measure of inflation – increased by 1.8pc.
The data were distorted by a single month drop in bonus payments of more than 25pc in April, compared with a rise of 47pc in April 2013. Last year’s figure was boosted by companies delaying bonus payments until the new tax year to help staff benefit from a cut in the top rate of income tax to 45p, from 50p.
However, pay excluding bonuses grew by just 0.9pc over the quarter, suggesting that while jobs growth remains robust, household spending power continues to be eroded by inflation.
“Britain’s jobs market is booming everywhere apart from in most people’s pay packets,” said John Philpott, director of the Jobs Economist. “Total unemployment is down sharply, while long-term unemployment has fallen below 800,000 and youth unemployment is now clearly on a sharp downward path. Yet despite all this very good news the rate of growth of average earnings has slowed.
“This is a jobs recovery like never before, loads more work but no greater reward, an economy that looks much healthier but feels little better in the workplace.”
Several forecasters, including the Bank of England and the Office for Budget Responsibility expect wages to begin outpacing inflation on a sustained basis from the second half of this year.
The rise in employment was mainly due to people being employed by companies rather than higher self-employment, with full-time employees accounting for almost two-thirds of the increase. An extra 73,000 workers registered as self employed between February and April compared with the previous quarter, although on a monthly basis, the number of self-employed workers fell to 4.37m in April, from 4.55m in March.
Experimental statistics showed the single-month jobless rate plummeted to 6.4pc in April, from 6.8pc in March. However, the data are volatile and often revised.
The continued strength of the labour market, which has seen almost 800,000 jobs created over the past year, has raised questions about how long the Bank of England can refrain from raising interest rates, as it tries to avoid derailing Britain’s nascent recovery.
Earlier this week, Ian McCafferty, an external member of the Bank’s Monetary Policy Committee (MPC) said the time to raise interest rates was “approaching”. However, he added: “There is scope for the economy to grow a little further before we really get to that point and once we get to that point … any rises in interest rates we hope will be only gradual for some time to come.”
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