Unemployment is declining rapidly. But the weakness of earnings growth is taking steam out of the economic recovery, says the cebr.
Data released yesterday by the Office for National Statistics show that the UK unemployment rate fell again during the three months to July, and now stands at 6.2% – the lowest rate since late 2008. The decline in unemployment over the past year has been rapid, reflecting the strength of the UK’s economic recovery. Unemployment declined by 468,000 over the past 12 months – the largest annual fall since 1988.
However, wage data continue to disappoint and stand at historically low levels. For the three months to July, average regular pay (excluding bonuses) was just 0.7% higher than a year earlier. Even with consumer price inflation relatively low at 1.5% on the latest data (for August), earnings growth is languishing behind the rising cost of living, meaning that employee living standards are declining.
Key Labour Market Statistics published yesterday by the ONS:
- Comparing the estimates for May to July 2014 with those for February to April 2014, employment continued to rise and unemployment continued to fall. These changes continue the general direction of movement since late 2011/early 2012.
- There were 30.61 million people in work. This was 74,000 more than for February to April 2014, the smallest quarterly increase since April to June 2013. Comparing May to July 2014 with a year earlier, there were 774,000 more people in work.
- The proportion of people aged from 16 to 64 in work (the employment rate), was 73.0%, slightly higher than for February to April 2014 (72.9%) and higher than for a year earlier (71.6%).
- There were 2.02 million unemployed people, 146,000 fewer than for February to April 2014 and 468,000 fewer than a year earlier. This is the largest annual fall in unemployment since 1988.
- The unemployment rate continued to fall, reaching 6.2% for May to July 2014, the lowest since late 2008. The unemployment rate is the proportion of the economically active population (those in work plus those seeking and available to work) who were unemployed.
- There were 8.93 million people aged from 16 to 64 who were out of work and not seeking or available to work (known as economically inactive). This was 114,000 more than for February to April 2014 but 31,000 fewer than for a year earlier.
- The economic inactivity rate was 22.1%, higher than for February to April 2014 (21.8%) but lower than for a year earlier (22.3%).
- Pay including bonuses for employees in Great Britain was 0.6% higher than a year earlier. Pay excluding bonuses for employees in Great Britain was 0.7% higher than a year earlier.
All the reaction:
David Freeman, ONS senior statistician: “Most of the growth is being driven by women working part-time, although there has been a slight increase in the number of full-time employees. The number of people working part-time who want to be in full-time employment is down to 1.3 million and is now at its lowest level since the end of 2011.”
CIPD Chief Economist, Mark Beatson: “Figures vary from month to month but employment has continued to grow, perhaps not as quickly as in the last three or four quarters, but still by enough to keep pace with a growing population and deliver a big reduction in unemployment. Vacancies continue to rise and this is in line with our recruitment intentions survey, which shows that employers expect to carry on recruiting. The numbers working for themselves also continue to grow strongly.
“At a time when many other European countries are struggling to create jobs, this is a considerable achievement. However, the new figures also show that pay growth remains very subdued and well below all measures of price inflation, so the improvements in productivity and pay that we are all looking for are still not in sight. Employers need to take advantage of the currently favourable recruitment climate to invest in upskilling their business and its people.”
TUC General Secretary Frances O’Grady: “Last week the Governor of the Bank of England said the fall in real wages is the worst since the 1920s and today’s figures show it getting worse. Pay increases are less than half the rate of inflation, so living standards keep on falling.
“More people are working, but growth based on more low-paid jobs isn’t working for Britain. We need jobs that ensure everyone gets a fair share in the growing economy through real increases to their wages.”
Ian Stewart, chief economist at Deloitte: “The UK is seeing a job-rich recovery driven by a boom in private sector hiring and self-employment. For every job lost in the public sector in the last year, 3.7 jobs have been created in the private sector.
“Crucially, a majority of the new jobs created are in full time employment. Wages remain the missing link in this recovery. But with job vacancies up by 25% in the last year and unemployment at a six year low we see earnings heading up from here.”
Bernard Brown, partner and head of business services at KPMG: “The leaves of autumn may be falling but the sun is certainly still shining on employment prospects across the UK. Hot on the heels of OECD suggestions that our economy is expanding faster than any other G7 country, the latest figures give the clearest indication for some time that employers are prepared to spin the wheel of fortune and invest in new recruits. The question on candidates lips, however, will be what they can expect to earn. Inflation may be down, but wages have been stifled for so long that many will use the new found economic confidence to demand more before they sign on the dotted line.
“With another rise in the number of people finding work, recent headlines about potential job losses and companies falling into administration may come as a surprise to many. But they shouldn’t be dismissed as a blip. Now the economy is improving, companies and funders are more likely to take decisive action which, perhaps counter-intuitively to some, can lead to an acceleration in corporate insolvencies. There is some consolation, however, that the jobs market is now in a better position to absorb job losses caused by company administrations.
“There will be some nervousness about the skills at employers’ disposal as they plan for the long-term and it’s the conundrum of meeting immediate demand with employing the skills needed tomorrow that business will need to balance if economic growth is to continue.”
Mary Ellen Dugan, Vice President Corporate Marketing at Indeed.com: “Figures from the Department for Work and Pensions released today reveal that the number of women in work is rising faster in the UK than in any of the world’s most advanced economies – a great sign of just how ambitious British women are when it comes to their careers.
Recent research from Indeed.com reflects this determination finding that two-thirds (68%) of 18-30 year old women in the UK think they should have landed their perfect job by the age of 30.
In addition, a third (31%) of young British women also cite landing the right job as the most important goal to achieve the soonest, before other goals such as getting married or owning a property (see top 5 list below). It’s great to see such a positive outlook of the job market for young women actually reflected in today’s statistics. Finding the right job not only leads to a happy work life, but it has a positive ripple effect on the rest of your life so it’s important to find the right fit.”