Jobs market continues to show strength with 3.4% hike in wages
At the same time, the UK unemployment rate dropped to over a four-decade low of 3.9% in the November to January period. That’s the equivalent of an extra 222,000 jobs.
Wages continue to outpace inflation, which sat at 1.8% in January.
The ONS figures also showed that the number of people who have dropped out of the labour market has hit a record low of 20.7%. This is largely due to a drop in student numbers, and the number of retired people. However, short and long-term sickness has increased.
Tom Stevenson investment director for personal investing at Fidelity International, said: “The jobs market is continuing to recover despite deepening Brexit uncertainty. Real, inflation-adjusted incomes continue to grow solidly….The number of people working in Britain rose to 76.1% of the workforce, the highest figure on record.”
He said the only fly in the ointment was that, adjusting for inflation, wages remained below their pre-financial-crisis high. Therefore, workers have experienced a lost decade of earnings stagnation: “In the next coming month the strength of UK wages will really be put to the test if the Brexit fog fails to lift.”
UK wages versus UK economy
Helal Miah investment research analyst at The Share Centre, added: “The low unemployment rate is also working its way through to improving worker’s wages which for so long has been puzzling as to why it is not higher given the historically low unemployment rates. Wage rises in this region compared to inflation, which has just fallen below 2%, will be welcomed and a sign that the UK economy is doing relatively well.
“However, this set of data contrasts that of many other data points such as slowing GDP, industrial and manufacturing data along with business investment statistics. High employment rates at a time of low economic growth and investment levels suggests businesses are hiring workers instead of ploughing money into capital investment projects in this highly uncertain environment.”
Miah said hiring and firing activities tend to lag economic activity, so these numbers may begin to reverse in the months and quarters to come.