Employment numbers steady but wage growth stuck in neutral
The employment rate between October and December 2017 was 75.2%, slightly down from the 75.3% recorded in the three months to November. However, it’s up on the 74.6% seen in the previous year.
According to the Office for National Statistics (ONS), there were 32.15 million people in work, 88,000 more than for July to September 2017 and 321,000 more than for a year earlier.
Unemployment over the three months came in at 4.4%, up on the 4.3% in last month’s readings, but it’s down from 4.8% in the previous year. In total, there were 1.47 million unemployed people, 46,000 more than for the three months to September but it’s 123,000 fewer than recorded last year.
The ONS reports there were 901,000 people in employment on zero hours contracts as their main job.
While the labour market figures show a slight dip from the record highs, wages continue to be stretched.
Average weekly earnings for employees in nominal terms (not adjusted for inflation) increased by 2.5% including and excluding bonuses. However, when taking inflation into consideration, average weekly earnings for employees in real terms actually fell by 0.3% both including and excluding bonuses.
This means wages have fallen for the third consecutive reading and still lag inflation which was recorded at 3% for January.
Maike Currie, investment director for personal investing at Fidelity International, said with the Bank of England increasingly pinning the chances of further interest rate hikes on accelerating pay growth (alongside Brexit progress), the prospect of an early rate rise seems “unlikely”.
She said: “With wage growth stuck in neutral, policymakers will need to think very carefully about a rate hike in May. It’s impossible to ensure sustainable economic growth when people have less money to spend due to anaemic wage growth.
“Meanwhile, inflation remains stubbornly high, with last week’s CPI figure showing inflation stuck at 3%. The squeeze on UK households continues with a lethal cocktail of rising prices, paltry pay growth and record low interest rates. As long as inflation outpaces earnings growth, UK consumers are getting progressively poorer as each month rolls by.
“The absence of wage growth remains the missing piece of the puzzle in the UK’s slow road to economic recovery – high employment should be the worker’s best friend because that’s what pushes up wages. Yet, despite more people employed in the UK than ever before, this just isn’t feeding through into our pay packets.”