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
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
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

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

Dame Harriet Walter interview

The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links