Employment rate hits record high as wages continue to crawl up

Office of National Statistics recorded the last time it was this high was in 2005, before the recession

Office workers sit around a monument in Paternoster Square, in front of the London Stock Exchange (Oli Scarff/Getty Images)

The employment rate has touched a record high, according to official statistics released yesterday, in the latest sign of the strength of the British jobs market.

The Office for National Statistics reported that the employment rate among people aged 16 to 64 rose to 73.2 per cent in the final quarter of 2014. The only other time it has been that high was in January 2005, before the global financial crisis.

The participation rate collapsed in the 2008-9 recession, bottoming out at 70 per cent. It has been climbing steadily over the past three years. The unemployment rate also declined again, falling to 5.7 per cent, down from 6 per cent in the third quarter. In January, the dole claimant count fell by a further 38,600.

The picture on wages from the ONS was more mixed. The three-month average growth rate of total pay, including bonuses, strengthened to 2.1 per cent in December, well above the rate of consumer price inflation. But regular pay, excluding bonuses, rose by 1.7 per cent, down from the 1.8 per cent in November. And despite rising faster than inflation, average wage growth is still well below the 4 per cent nominal increases seen before the financial crisis.

Elsewhere, the latest minutes from the monthly meeting of the Bank of England’s Monetary Policy Committee showed another 9-0 vote in favour of keeping interest rates at 0.5 per cent. Two members said the decision was “finely balanced” and one said there could be case for increasing interest rates later in the year.

But one other member said the weak outlook for inflation means the next change was “roughly as likely” to be a loosening as a tightening.

Earlier this week, the ONS reported that annual consumer price inflation slipped to just 0.3 per cent, its lowest level in more than half a century, mainly because of collapsing global energy prices. The Bank expects outright deflation some time in the spring, although it does not think prices will stay negative for very long.

“Given that inflation is expected to fall below zero in the coming months, and stay close to zero for the rest of the year, there is no pressure on the Bank to raise interest rates in the short term,” said Ben Brettell, of Hargreaves Lansdown.

“With inflation likely to pick up once the effect of the drop in oil prices falls out of the year-on-year calculation, a cut in rates looks most unlikely – but I don’t see them rising until mid-2016 at the earliest.”