UK labour market robust but real wages stagnate
The employment rate for the period was 74.6%, the joint highest since comparable records began in 1971, according to the Office for National Statistics (ONS).
There were 31.84 million people in work during December 2016 and February 2017, 39,000 more than the preceding quarter and 312,000 more than recorded in the previous year. The rise has been fueled by more self-employed workers, fewer women retiring between the ages of 60 and 65 and an increase in workers in family businesses who do not receive a formal wage but benefit from the profit of that business.
Unemployment over the three months was 4.7% down from 5.1% recorded a year earlier, with a total of 1.56 million people not in work. This level is 45,000 fewer than for the three months to November 2016 and 141,000 fewer compared with a year earlier.
Wage growth was recorded at 2.3% including bonuses (2.2% excluding bonuses) which compares to a growth rate of 2.2% between November 2016 and January 2017. Average weekly earnings in real terms (adjusted for inflation) increased 0.2% (including bonuses) and 0.1% (excluding bonuses), compared with a year earlier. These are the lowest annual growth rates seen since July and October 2014.
The figures reveal the average weekly pay for employees in the UK stands at £509, up from £380 a week recorded back in January 2005.
Ben Brettell, senior economist at Hargreaves Lansdown, said with CPI inflation steady at 2.3%, today’s labour market numbers reveal real wage growth now stands at zero.
“With inflation forecast to carry on rising – the Bank of England predicts a peak around 2.8% early next year – real wages are likely to start falling soon, squeezing household budgets. The UK economy is heavily reliant on consumer spending and this could prove a headwind for economic growth as we move through the year,” he said.
“Notwithstanding relatively weak wage growth, the UK labour market looks fairly robust – for now at least. The employment rate and the number of vacancies are at record highs, while the unemployment rate is unchanged at 4.7% – the last time it was lower was in 1975. Unemployment is expected to rise later this year as Brexit-related uncertainty deters firms from hiring more workers, but at least any rise will be from historically low levels.”
Brettell also said that the labour market may be showing signs that things are about to become tougher.
He said: “The claimant count, which in a quirk of the data is a more recent figure than the unemployment rate, showed the number of unemployment benefit claimants rose by 25,500 to 765,400 in March, the largest increase since July 2011. Economists had expected a small fall. The claimant count figure is often viewed as an early warning signal of a potential economic downturn, so this surprise increase could be a sign that labour market conditions are about to become tougher.”