Good news on jobs... so how about the wages?

Outlook

Weekly wages in the private sector are now growing at an annual rate of up to 3.6 per cent (Getty)

What’s happening in the world of work outside the unreal world of the City of London and its banks? Well, things look encouraging, at least as far as jobs go. Britain continues to create them, and at a decent clip. Unemployment is at its lowest level since 2005 and employment is at a record high, with the total number of people in work in this country having hit 31.39 million – 74 per cent of the workforce.

It didn’t come as any great surprise to see the Chancellor crowing. The workers he was saluting might not be as cheerful as he is, however, when they check their payslips. With such a tight labour market, and business groups such as the Institute of Directors raising the issue of Britain’s skills gap again, you might be expect to see wages rising steadily. But they aren’t. In fact, pay rises are slowing again, to 2 per cent from 2.4 per cent, which was lower than the City had expected, and certainly lower than people in employment would have liked.

He didn’t say so, but it’s bad news for George Osborne, too. He could do with wages rising a bit faster, because higher wages lead to higher income tax receipts and, thus, a lower budget deficit.

In private he might every well agree with the Trades Union Congress, which has long been arguing that Britain needs a pay rise. Still, Investec’s excellent Philip Shaw notes that the monthly figures, rather than the three-monthly numbers preferred by the Office for National Statistics, suggest a brighter outlook. Wage growth may be picking up again, having hit a trough.

Just as long as Britain’s economic motor hasn’t reached a peak and the “cocktail of economic risks” that the Chancellor has warned us all about isn’t realised.