Unemployment Rate Dropped Again But Pay Struggles to Flourish

    Unemployment dropped again in the three months to August, keeping the rate of joblessness at its joint-lowest level in 42 years and reinforcing the employment recovery of Britain.

    The Office for National Statistics revealed that an additional 94,000 people were employed at the end of the three-month period, the majority of whom are women.

    Unemployment is currently at 1.44m, the lowest number since 2005. The joint-lowest level since 1975 is the rate of 4.3pc.

    Overall employment grew to 32.1m – though it is slightly down compared with the overlapping three-month period to July.

    Over the past year, the amount of people that are employed has surged by 317,000, prompted by more women accepting full-time jobs, while unemployment is down by 215,000.

    “I still think that the unemployment rate will fall to 4.1pc by Christmas,” stated an economist at Scotiabank, Alan Clarke.

    “If that happens, it will make the case for another [interest rate] hike after the November meeting [of the Bank of England’s Monetary Policy Committee].”

    Supporting the expectation that unemployment could drop further, the number of job vacancies grew to another near-record high of 783,000.

    “With little slack in the labour market, the degree of mismatch between the skills of the remaining workers and the skills demanded by firms will widen, this should underpin a modest acceleration in wage growth over time,” stated an economist from Berenberg Bank, Kallum Pickering.

    However, that has not yet happened, and wages are still striving to rise, opposing predictions that record-low joblessness would increase earnings.

    Over the three months, pay growth stayed flat, increasing by 2.2pc on the year, in line with the growth in July and marginally surpassing expectations of a 2.1pc growth.

    However, that remains below inflation, showing that workers are losing out in real terms. Consumer prices increased by 2.9pc over the same period and picked up further in September.

    Economists do not expect pay to accelerate anytime soon, however.

    “There has certainly been some renewed momentum in the level of regular pay having come to a standstill earlier this year. But at this stage, we put this down to temporary drags starting to unwind (things like pension changes and the apprenticeship levy, both of which the Bank of England has previously highlighted),” stated James Smith, an economist at ING.

    “We think its probably too early to say this is the start of a more rapid upward trend and crunching the numbers, we don’t expect wage growth to go much above 2.1pc to 2.2pc before next summer. So whilst we expect headline inflation to peak at 3.1pc next month, the gap between CPI [a measure of inflation] and wage growth is likely to stay fairly wide for some time to come.”

    The pressure on the spending power of households is setting the scene for a major row at the Budget, with the Government contending that it is supporting earnings but critics pointing to the newest figures as evidence it is not working.

    “Our economy is helping to create full time, permanent jobs, which are giving people across the UK the chance of securing a reliable income,” stated Damian Hinds, the employment minister.

    “We’ve boosted the income for people on the lowest pay by increasing the National Living Wage and delivered the fastest pay rise for the lowest earners in 20 years.”

    However, the Trades Union Congress called for more action.

    “Pay packets are taking a hammering. This is the sixth month in a row that prices have risen faster than wages,” stated Frances O’Grady, the general secretary.

    “The Chancellor must help struggling families when he gives his Budget next month. This means ditching the artificial pay restrictions on nurses, midwives and other public sector workers. And investing in jobs that people can live on.”