Employment hits record high and wage growth outpaces inflation

The number of people in work has reached another high and wages are growing at their fastest pace since the Brexit referendum despite a slowdown in the economy.

The Office for National Statistics said 32.71 million were now in employment, after a rise of 179,000 people in the three months to the end of February, the highest since 1971. Unemployment fell by 27,000 to 1.34 million, putting the rate at 3.9 per cent, the lowest level since 1975.

In explaining the robust performance of the labour market, economists pointed to the flexibility of the British labour market. It is easier and cheaper to recruit workers to meet demand than to commit to extra business investment, which has been falling.

According to the latest figures, the growth in employment was mainly driven by an increasing number of women entering the labour market. The economic inactivity rate for women fell to 25.3 per cent during the period, the joint-lowest figure since records began in 1971. The number of economically inactive students also fell by 38,000 and the number of people opting out of the labour market to “look after family” declined by 40,000.

Even though a record number of people are now in work, the annual rate of employment growth slipped in the three months to February to 1.4 per cent, from 1.5 per cent in the previous quarter when 222,000 extra jobs were created.

Economists warned that the record-breaking period of employment growth could be coming to an end.

Andrew Wishart, UK economist at Capital Economics, the consultancy, said: “Although the labour market was unable to repeat last month’s emphatic performance, employment growth was still a solid 179,000 in the three months to February. We suspect that this could mark the peak of employment growth as the Brexit uncertainty reached its crescendo.”

Matt Hughes, deputy head of labour market statistics at the ONS, said: “The jobs market remains robust, with the number of people in work continuing to grow. The increase over the past year is all coming from full-timers, both employees and the self-employed.

At 76.1 per cent, the employment rate is the highest for 48 years and the tightness of the labour market is driving a period of sustained pay growth. Average weekly earnings, including bonuses, increased by 3.5 per cent in the year to February, with wages continuing to outpace inflation. After adjusting for inflation, wages grew by 1.6 per cent, the fastest rate since July 2016.

Although wages have been outstripping inflation for several month now, the Resolution Foundation said that, at £529, average weekly total pay was £12 lower than before the referendum.

Stephen Clarke, an economic analyst at the foundation, said: “Real wage growth has finally returned to pre-referendum levels, though the post-referendum pay slump has left us £12 a week poorer. This mini pay recovery is encouraging, but it is likely to be tested in the coming months as inflation is expected to start rising again.”

Alok Sharma, the employment minister, said: “ The UK jobs market continues to go from strength to strength, proving the underlying resilience of the British economy.”

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Women lead the way with joblessness at 44-year low!

Female unemployment has fallen below 4 per cent for the first time on record as the rising pension age for women and a thriving jobs market draw more women into the workforce.

Women accounted for the bulk of the fall in unemployment over the past year, the Office for National Statistics revealed as its latest figures again painted a picture of a robust labour market in defiance of Brexit concerns and slowing GDP growth.

Total employment for the three months to December climbed 167,000 from the previous quarter to 32.6 million, the highest since records began in 1971. The employment rate, at 75.8 per cent, was the equal highest recorded.

Unemployment dropped 14,000 to 1.36 million and at 4 per cent was at levels last seen 44 years ago. Inactivity, a measure of those who cannot or do not want to work, including students and the long-term sick, declined to a record low of 20.9 per cent.

The vacancy rate suggested that there would be no let-up to Britain’s jobs boom, which has pushed unemployment below the pre-crisis average of 5.1 per cent for three years.

In the three months to January, unfilled vacancies increased by 16,000 to 870,000, another historic high. Most of the unfilled posts were in service industries such as wholesalers, retailers and car repair shops.

Elizabeth Martins, an economist at HSBC, said: “The pace of job creation and pick-up in wage growth are reasons to remain relatively cheerful, despite some negative headlines about jobs in the auto industry.”

Pay also continued to recover. Regular wages rose by 3.4 per cent compared with the same period in 2017, the fastest pace in a decade. After adjusting for inflation, real-terms regular pay growth of 1.2 per cent was the highest in two years, ensuring that household living standards improved for an 11th month running.

The Resolution Foundation, a think tank that focuses on ways to improve the living standards of people on low incomes, said that the “encouraging news on pay came alongside good news on both job quantity . . . and job quality, as the share of workers on zero-hours contracts at the end of 2018 was down 57,000 on the previous year”.

It added, however, that real average pay was £10 a week lower than a decade ago, a legacy of three periods when real wages shrank after the financial crisis.

To guarantee that living standards will continue to rise, analysts believe that Britain’s woeful productivity record must improve. There was little evidence that it has done, however. Output per hour contracted by 0.2 per cent in the final quarter of 2018 compared with the same period a year before.

Alok Sharma, the employment minister, hailed the statistics as the result of the government’s “pro-business policies . . . These figures show the underlying resilience of our jobs market, once again delivering record employment levels.”

Britain’s employment success over the past year can be explained by a large increase in the female workforce. Of the 100,000 decline in unemployment in the year to December, 68,000 were women. The female employment rate reached 71.4 per cent, the highest on record.

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Workers at small firms ‘will opt out of pensions’ under auto-enrolment change

Smaller employers expect more of their staff to opt out of saving for their pensions when minimum deductions from their pay packets are increased this April, immediately after Brexit.

According to a survey by the Association of Consulting Actuaries, 65 per cent of businesses employing fewer than ten people expect modest or substantial decreases in participation.

About 6.1 million employees face a cut in their take-home pay when pension deductions under the automatic enrolment rules are increased in April, according to calculations by the Department for Work and Pensions.

Minimum employee contributions are due to be raised from 3 per cent of eligible pay to 5 per cent in that month, a time when there could already be considerable consumer uncertainty. Brexit, with or without a deal, is due to take place on March 29. Employer contributions are due to be raised from 2 per cent to 3 per cent at the same time, boosting total contributions to 8 per cent of pay.

Almost ten million people are now saving in workplace pensions as a result of the auto-enrolment regime begun in 2012. Some experts had feared that employees would opt out of saving when minimum deductions were raised last April, but the department said that by the end of June 2018 rates of opt-out had been consistent with levels before April.

However, the latest poll from the ACA suggests that staff at smaller employers, which typically pay lower wages, may be under more pressure to opt out this time. Opt-out rates for employees of smaller businesses are already much higher, at 26 per cent to 30 per cent, compared with staff at larger employers, where they are 6 per cent to 10 per cent. Seventy-five per cent of larger employers expect no extra opting out this April.

In its report into auto-enrolment, the association pointed out that despite the success of the policy in enrolling ten million employees into pension saving, 13 million people in the private sector were still not saving in a pension.

The self-employed and employees under 22 are excluded from the rules, which also apply only to people with annual earnings of more than £10,000. Moreover, deductions start to be made only on earnings above £6,032.

In its latest evaluation report on auto-enrolment, the work and pensions department said that more than 1.4 million employers were now complying with their duties, although the number suspected of failing to comply had more than doubled in the past year as the smallest employers were now required to take part. Compliance notices sent by the Pensions Regulator to employers suspected of not fully complying are now running at 5,000 a month, rising from 34,000 in 2016-17 to 61,000 in 2017-18.

Auto-enrolment was introduced to “nudge” low earners into saving into a pension, while not compelling them to do so. Employees can opt out, but they have to opt out again every three years.

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Wages on rise as employment at its highest since records began!

Wages grew at their fastest pace in a decade in the three months to October and the number of people in work has reached a record high, official figures show.

Regular pay, excluding bonuses, grew by an average of 3.3 per cent in the period, up from 3.2 per cent in the three months to September, according to the Office for National Statistics. After adjusting for inflation, regular wages grew 1 per cent in the October period, a level not reached since the final quarter of 2016. Wages have been growing faster than inflation for nine months.

After a decade of wage stagnation analysts said that the tightness of the labour market was beginning to cause sustained pay growth and that consistent rises in real wages were possible. Stephen Clarke, senior economic analyst at the Resolution Foundation, said: “2019 looks set to be a far better year for pay than this one. But after a pretty appalling decade, Britain remains some way off a return to the levels of real pay we enjoyed before the crash.

“While Brexit uncertainty and political paralysis are having a cooling effect on the wider economy, the labour market is proving more resilient. Britain’s tightening jobs market is delivering stronger pay rises, particularly for workers in ICT, hospitality and real estate.”

The job market remains strong, with employment reaching 75.7 per cent, the highest since records began in 1971. The number of people in work grew by 79,000 to 32.4 million in the three-month period, while unemployment rose by 20,000 to 1.38 million, which remains 49,000 lower than a year ago.

It was the second month running that unemployment rose even with vacancy levels close to a record high. Economists have said that the combination of a high vacancy rate and rising numbers out of work is a sign of skill shortages. The unemployment rate was unchanged at 4.1 per cent, above the 43-year low in August of 4 per cent.

Economic inactivity, which measures the number of people neither working nor seeking work, fell from 21.5 per cent a year ago to 21 per cent. There were an estimated 8.66 million economically inactive people in Britain during the period.

Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, said that the further rise in wage growth had strengthened the case for the Bank of England to raise interest rates at the earliest opportunity after the threat of a no-deal Brexit had disappeared.

“The [monetary policy committee] needn’t panic and raise the bank rate while the economy is visibly slowing due to the risk of a disastrous no-deal Brexit next year. A May rate hike, after a no-deal Brexit likely has been averted, remains a good bet,” he said.

Alok Sharma, the employment minister, said that the latest figures pointed to “the enduring strength of our jobs market, with wages outpacing inflation for the ninth month in a row”. He added: “This is benefiting people across the country, with almost 400,000 more people in work in the last year, putting more money in the pockets of working families, and showing that the UK remains a great place to invest and do business.”

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Foreign exodus leaves skills shortage before Brexit

Employers planning to take on staff are being hit by a skills shortage because of an exodus of foreign workers, a survey has found.

The jobs market is in the throes of a “supply shock”, with the flight of adults born outside Britain highlighting the dearth of skilled workers in many key sectors, according to research from the Chartered Institute of Personnel and Development and Adecco, the staffing company.

Seven in ten employers have had difficulties filling vacant positions, with two out of five warning that recruiting the right people has become harder over the past year, according to the survey of more than 1,000 companies.

Uncertainties around Brexit and the drop in the value of the pound in the aftermath of the 2016 referendum have been blamed for a reduction in the number of foreigners working in the UK. The number of workers in Britain who were born abroad decreased by 58,000 between the second quarters of 2017 and 2018, compared with an increase of 263,000 over the previous 12-month period, according to the institute’s report. The fall has been driven primarily by a drop in the number of migrants from outside the European Union, it said.

“The labour market in the UK is tight and this research is reporting increasingly high levels of recruitment and retention difficulties. While the data is not showing wages rising across the board, we are regularly seeing this pressure being exerted in the recruitment space,” Alex Fleming, who runs Adecco’s British division, said.

The report warned that the labour supply could be further “constrained” from 2021, when migration restrictions for EU citizens would be introduced under present Brexit plans. A third of employers polled by the institute said that the administrative burden of extending the points-based visa system used for non-EU citizens to European workers would be “too great”.

Separate data from Indeed, a job-hunting website, found that non-European jobseekers looking for skilled jobs in the UK outnumbered Britons by as much as fifteen to one for some roles, including IT consultants, research fellows and developers.

The numbers of EU and non-EU jobseekers searching for skilled jobs in Britain has remained stable this year, its research found, with one in ten enquiries for British technology jobs coming from jobseekers abroad.

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Firms may have to check EU citizens’ right to work

Employers may have to check whether EU citizens have the right to work in the UK if there is a no-deal Brexit, the immigration minister disclosed yesterday.

Caroline Nokes admitted, however, that firms would not be able to differentiate between EU citizens who are new arrivals and those who have been in the country for years with a right to work and the entitlement to stay.

The government wants the estimated 3.5 million EU citizens in Britain to apply for settled status so that they can continue to live and work here but that will not happen by the time Britain is due to leave the bloc next March.

“If somebody has been through the settled status scheme they would be able to evidence that,” she said. “If somebody hasn’t been here prior to the end of March next year, employers will have to make sure they go through adequately rigorous checks to evidence somebody’s right to work.

“It would pose a challenge to government and indeed employers in differentiating between those two groups of people.”

In a difficult evidence session at the home affairs select committee, Ms Nokes was repeatedly asked what the checks would be. She offered to clear up any confusion in a letter to the committee.

The immigration minister said that an immigration bill would “turn off free movement” once Brexit happened and remove the automatic right of EU citizens to live and work in Britain. Ms Nokes added that in the event of no deal new immigration controls would apply to EU citizens arriving in the UK next year.

She said that determining people’s status would be tricky during the planned two-year transition period, whether or not a deal was agreed. Even if there is no deal, EU citizens will still have until March 2021 to apply for settled status.

Mike Spicer, of the British Chambers of Commerce, said that the issue of checks was a source of serious concern for companies. “Businesses can’t plan on the basis of warm words; they need to see written in black and white directions from the government about how exactly this scheme will operate.”

Satbir Singh, of the Joint Council for the Welfare of Immigrants, said: “Employers [have been told to] check EU nationals’ ‘paperwork’ to determine their right to work after Brexit, despite the fact that no such paperwork exists.”

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Wages grow (3.1%) at fastest rate in a decade — and beat inflation

Wages have risen at the fastest pace in almost ten years, easing the pressure on UK households.

Earnings, excluding bonuses, increased by 3.1 per cent in the three months to August compared with a year earlier, according to the Office for National Statistics.

The rise outstripped the growth of 2.9 per cent in the three months to July and the 2.6 per cent forecast by economists.

Hopes were raised last week that a “lost decade” of pay growth after the financial crisis was finally over when Andy Haldane, chief economist at the Bank of England, said that there was “more compelling evidence of a new dawn breaking for pay growth, albeit with the light filtering through only slowly”.

The earnings data came alongside jobs figures which showed that the unemployment rate held steady at 4 per cent, a four-decade low. The overall figure fell by 47,000 to about 1.36 million. Economists said the “tightness” in the labour market was finally creating pressure to increase wages.

Thomas Pugh, UK economist at Capital Economics, said: “Surveys of wage growth suggest that it will sustain a pace of about 3 per cent year-on-year over the remainder of 2018.”

However, the boost to households’ spending power was tempered by inflation. The consumer price index measure of inflation was 2.7 per cent in the three months to August. Figures for September are released today.

Experts also said the pay growth was likely to be concentrated among new starters, key staff and recipients of the national living wage, unless productivity growth improved. The CBI said that weak productivity remained the “UK economy’s Achilles heel”.

Mr Pugh added: “Nonetheless, we expect real wage growth to increase over the next year which should lift consumer spending and feed through into an acceleration in GDP.” The Resolution Foundation, an economics think tank, said inflation meant that real pay growth remained at 0.7 per cent compared with a “norm of over 2 per cent before the financial crisis”.

Suren Thiru, head of economics at the British Chambers of Commerce, said: “Achieving a meaningful improvement in wage growth will be an uphill struggle unless the underlying issues that continue to limit pay settlements are tackled — notably sluggish productivity, considerable underemployment and high upfront costs for businesses.”

Mr Thiru also said that with the number of job vacancies close to record highs, there were signs of a skills shortage. “Companies are reporting that recruitment difficulties have reached critical levels, which coupled with Brexit uncertainty is increasingly putting employers off trying to hire, and if sustained could increasingly weigh on jobs growth.”

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Amazon’s virtual recruiter had a grudge against women!

Amazon inadvertently built itself a sexist recruitment assistant in a failed experiment that demonstrated why artificial intelligence does not necessarily lead to artificial wisdom.

The company set out to create a virtual hiring tool that would sift thousands of job applications far more efficiently than people can. Unfortunately, the AI algorithm taught itself to discriminate against women based on the fact that many more men had applied for and got jobs in the past.

The new system began to penalise CVs that included the word “women’s”, as in “women’s chess club captain”. It downgraded applications sent by graduates of two all-female universities and prioritised applications that featured verbs more commonly found in male engineers’ CVs, such as “executed” and “captured”.

The company tinkered with the software to remove this bias but was unable to guarantee that no other discriminatory sorting procedures had crept in. The team working on the project was disbanded last year and said that Amazon recruiters looked at the recommendations generated during the trial but never relied exclusively on those rankings. The tool was “never used by Amazon recruiters to evaluate candidates”, the company said.

Amazon began building computer programmes to review job applicants’ CVs in 2014. “Everyone wanted this holy grail,” one source told Reuters. “They literally wanted it to be an engine where I’m going to give you 100 résumés, it will spit out the top five, and we’ll hire those.” However, not only did the AI teach itself gender bias, it would also often recommend unqualified candidates for inappropriate jobs.

Nihar Shah, who teaches machine learning at Carnegie Mellon University, said: “How to ensure that the algorithm is fair, how to make sure the algorithm is really interpretable and explainable — that’s still quite far off.”

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Sick days at record low as worried workers battle on

The days of calling up the boss to cough down the line and weakly say you are too ill to come into work before lying in bed with daytime television are over.

The Office for National Statistics said that the number of sickness days had almost halved over the past two decades to reach a record low. It dropped from an average of 7.2 days in 1993 to 4.1 days in 2017 and had been steadily falling since 1999. The total days lost for all workers last year was 131.2 million, down from 137.3 million in 2016 and 178.3 million in 1993.

Some employment groups have argued that this fall damages the economy because it suggests workers worried about job security are still coming into work even when ill, lowering their productivity levels.

In May the Chartered Institute of Personnel and Development reported that the number of companies reporting a rise in employees going into work when they were ill had more than tripled since 2010 and warned that organisations should do more to discourage “presenteeism”.

The ONS acknowledged that there may be an increase in people going into work even when they are ill, but added that the fall could also be due to our healthy life expectancy improving.

The figures also showed that the average number of sick days taken in the private sector is much lower than in the public sector, suggesting that these workers are avoiding sick days as they are at risk of not being paid.

The sickness absence rate, which measures the working hours over the year that are lost to sickness, stands at 2.6 per cent in the public sector and 1.7 per cent in the private sector.

The ONS said: “Higher sickness absence in the public sector is partly explained by the profile of the workforce: it employs more older people and women, both of whom tend to have higher rates of sickness absence; it is more likely to employ staff with a long-standing health condition who are more likely to go off sick and tends to offer more generous sick pay arrangements.”

Since the financial crash, sickness absence rates have declined by 0.5 percentage points to 1.9 per cent last year.

Coughs and colds remained the biggest cause of people taking time off work, making up 26.2 per cent of days lost through sickness absence last year, which equates to about 34.3 million days.

However, the figures also found that there was a rise in young workers aged between 25 and 34 who took time off with mental health problems — the rate in this category rose from 7.2 per cent in 2009 to 9.6 per cent last year.

Women were more likely than men to cite mental health conditions as the reason for being off sick, at about 8.1 per cent of women compared with 5.7 per cent of men. The ONS said that this might be because men were less likely to seek medical help for mental health problems than women.

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Employers get inside your mind by asking if you have an imaginary twin!

Some of Britain’s biggest companies and government departments have started using a new form of “deep” psychological profiling to assess job applicants.

The online assessment asks candidates a series of questions such as “Have you ever had an imaginary twin?” in order to uncover “subconscious latent potential” and weed out job hunters who look good on paper but may perform less well in the office.

The developers say that the 30-minute questionnaire can also reveal underlying motivations and mental health problems.

It asks more than 50 questions, including “When you have done something well, who do you want to know?” and “Remember the moment when you first lost out to a rival. What did you do?” It also examines how people handle conflicts with their family, friends and partners. The researchers say that talking about an imaginary twin allows people to provide insights about themselves that they may otherwise have chosen to keep hidden.

Curly Moloney, one of the founders of The Cambridge Code, said: “Each question tells us a small thing but when put with other answers it becomes a small jigsaw piece in a big picture.”

She added that the test could pick up traits such as inner drive, which does not usually become apparent until after several months in the job. She also believes it can help women in particular.

“I’ve come across many female chief executives who are great at running a company, but don’t interview well,” she said. “I think this is why a lot of women don’t end up on boards, even though they would be very good at it.”

The team created the test after analysing responses and tracking the careers of more than 10,000 people. “The tool is proven to uncover the subconscious latent potential and wellbeing present in all of us, but lies beyond the reach of established psychological measurement,” the company’s website says.

The company says that the test helps to show how flexible and resilient candidates are, their drive and potential and how they deal with authority, which are necessary skills in the modern workplace but are hard to uncover in interviews. It also seeks to establish how good applicants are at managing people and dealing with rivalries.

“To make it to the top of an organisation or a senior leadership role, an individual needs to be able to make tough decisions and to have the capacity to live with the consequences of their actions. In most individuals this element of ‘steel’ or ruthlessness is contained but can flash when necessary,” the company says.

The Cambridge Code does not reveal which companies use its techniques but Dr Moloney says she has worked with a third of FTSE 100 companies as well as governments at home and abroad. The company hopes that the test will also be used in doctors’ surgeries to give a rapid assessment of mental health conditions in patients.

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