Employment rate on the up but real wages shrink
The employment rate for the period was 75.1%, up from 74.5% a year earlier, according to the Office for National Statistics (ONS).
There were 32.10 million people in work during June to August 2017, 94,000 more than the preceding three months and 317,000 more than recorded in the previous year.
Unemployment over the three months was 4.3% down from 5% recorded a year earlier, with a total of 1.44 million people not in work. This level is the joint lowest since 1975 and is 52,000 fewer than for the three months to April 2017. It’s also 215,000 fewer than for a year earlier.
While the labour market data continues to show positive signs, average weekly earnings for employees in real terms (adjusted for inflation, excluding bonuses) fell by 0.4% (0.3% including bonuses). However, in nominal terms (not adjusted for inflation), average weekly earnings increased by 2.2% including bonuses and 2.1% excluding bonuses.
The average total real term pay for employees (including bonuses) was £488 a week before tax and other deductions, down from the pre-downturn peak of £522 per week recorded for February 2008. Average regular pay (excluding bonuses) was £459 per week before tax and other deductions, again lower than the pre-downturn peak of £473 per week recorded for March 2008.
‘Gap between pay packets and costs of goods remain vast’
With yesterday’s inflation figures showing prices rising 3% over the year to September, this means pay is still shrinking in real terms, according to Maike Currie, investment director for personal investing at Fidelity International.
“Another month, another fall in real household incomes. Today’s wage growth figures show our total earnings including bonuses grew at just 2.2% in the three months to August . With yesterday’s CPI figures showing inflation spiking to an eye watering 3%, the gap between our pay packets and the cost of goods and services continues to remain vast – our wages are not keeping up with the rising cost of living,” she said.
Currie added: “The absence of wage growth remains the missing piece of the puzzle in the UK’s slow road to recovery – high employment should be the worker’s best friend because that’s what pushes up wages. With UK unemployment at a 45-year low, one would think that workers’ bargaining power at the wage negotiation table would improve, yet earnings growth remains elusive and the UK’s workforce is getting poorer. There are many potential reasons for this ranging from poor productivity to the squeeze on public sector pay and the rise of self-employment in the so-called ‘gig economy.”
She said given the low wages and high inflation, we need our savings to work even harder in order to generate an inflation-beating return. “Even if the Bank of England does decide to pull the trigger on a November rate rise, it’s likely that the Old Lady of Threadneedle Street will only incrementally move rates up from 0.25% to 0.5%, which will be cold comfort to income-hungry savers.”