UK unemployment falls but wage growth still lags

 

A record rise in the number of people in work has helped unemployment fall to a five-year low but Britain's workers have been squeezed by a dramatic slowdown in pay growth, official figures showed today.

The jobless rate dropped to 6.6 per cent in the three months to April, a level it has not equalled since January 2009.

Chancellor George Osborne hailed the progress as an important step towards the goal of full employment, while Chief Secretary to the Treasury Danny Alexander said: "Britain is bouncing back."

But Labour and the unions pointed to the continuing "cost-of-living crisis", as the figures also showed that pay growth slumped to just 0.7 per cent, sharply down from 1.7 per cent the month before and well below inflation, running at 1.8 per cent.

Economists suggested the squeeze, which means real-terms pay packets are still falling, would offset pressure on the Bank of England to hike interest rates, which might have been caused by the better headline jobs picture.

Employment rose by a record 345,000 in the period to 30.54 million, the Office for National Statistics (ONS) said. It was the steepest rise since records began in 1971.

It means 780,000 jobs have been added since a year earlier, the biggest annual rise since 1989. Unemployment fell by 161,000 to 2.16 million in the three months. Long-term and youth joblessness were also down.

Employment minister Esther McVey said: "As we build a stronger economy, businesses up and down the country are feeling increasingly confident about creating jobs, meaning many thousands more people are in work every day."

Deputy Prime Minister Nick Clegg said: "This coalition Government is strengthening the foundations on which our economy is built, creating the conditions for greater confidence, more jobs and further growth."

The Chancellor said in a Twitter message: "More to do but progress towards our goal of Full Employment."

Prime Minister David Cameron said in a message to activists that two million private sector jobs had been created since the start of the coalition.

The figures showed these were up from 22.83 million at the end of June 2010 to 25.13 million by the end of March this year, a rise of about 2.3 million.

This included a large rise in the latest period, which was boosted by about 90,000 by the reclassification of Lloyds Banking Group as a private sector employer. The taxpayer stake in the bank has begun to be sold off and has shrunk to 25 per cent.

The slowdown in pay growth stalled hopes for a pick-up in real-terms wages.

It was largely accounted for by bonuses, which fell sharply compared with last year when in many cases they were deferred to April as tax changes were introduced.

Regular pay increases also narrowed, slowing from 1.3 per cent to 0.9 per cent. Earnings have not consistently been improving at a higher rate than the cost of living since 2008 but appear to have caught up in recent months.

A hoped-for acceleration in real-term wages would provide a boost for the coalition amid Labour claims that the recovery has yet to improve the lives of ordinary voters, but these hopes now look more distant.

TUC general secretary Frances O'Grady said: "Pay packets have nosedived since the Government prematurely declared an end to Britain's cost-of-living crisis last month."

Shadow work and pensions secretary Rachel Reeves said: "While this fall in overall unemployment is welcome, working people are over £1,600 a year worse off than when David Cameron came to office and pay has fallen behind inflation."

Trade union Unite said the fall in unemployment masked a rise in "precarious working", pointing to figures showing self-employment was up by 337,000 on the year to reach 4.54 million.

General secretary Len McCluskey said: "The 4.5 million now self-employed without rights, protections and pensions is a cause for worry, not for celebration. In David Cameron's Britain the mantra is work harder and get poorer."

Martin Beck, senior economic advisor to the EY ITEM Club, said the jobs market "looks set to continue advancing".

"However, for the recovery to truly hit home, pay packets need to start growing again," he added.

Samuel Tombs, of consultancy Capital Economics, said: "While the unemployment rate is continuing to fall, there is still enough slack in the jobs market to prevent wage growth from picking up."

This meant that while the fall in joblessness should in theory bring a rise in interest rates a step closer, the weakness in wages indicated more underlying spare capacity in the economy which will need to be used up first, he said.

Alan Clarke, of Scotiabank, said the low wage growth figures meant the chances of an interest rate hike being brought forward to this year had "suffered a big blow".

Additional reporting PA

Start your day with The Independent, sign up for daily news emails
News
election 2015The 10 best quotes of the campaign
News
A caravan being used as a polling station in Ford near Salisbury, during the 2010 election
election 2015The Independent's guide to get you through polling day
News
people
Voices
David Blunkett joins the Labour candidate for Redcar Anna Turley on a campaigning visit last month
voicesWhat I learnt from my years in government, by the former Home Secretary David Blunkett
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

Pan Am Experience: A 'flight' back to the 70s

Tim Walker checks in and checks out a four-hour journey with a difference
Humans aren't alone in indulging in politics - it's everywhere in the animal world

Humans aren't alone in indulging in politics

Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

Crisp sales are in decline

As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

Ronald McDonald the muse

A new wave of artists is taking inspiration from the fast food chain
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

Barcelona vs Bayern Munich player ratings

Lionel Messi scores twice - but does he score highest in our ratings?
Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

Explosive batsman who sets the range for Kiwis' big guns

Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'