Britain’s employment rate has reached its highest level since records began in 1971 but continued weak pay growth will encourage the Bank of England to delay raising interest rates.
George Osborne hailed the 74 per cent employment rate as an “important milestone on the road to full employment.” The figures from the Office for National Statistics revealed that there were 31.39 million people in work in three months to November, 267,000 more than for June to August and 588,000 more than for a year earlier.
More women were recorded as being in work than ever before, with 61.9 per cent employed, while unemployment fell fastest among the 18 to 24 age group, with 130,000 fewer young people unemployed than the same time last year.
The total number of people who were unemployed also fell to its lowest level in a decade. There were 1.68 million unemployed in Britain, some 99,000 fewer than for June to August 2015 and 239,000 fewer than for a year ago.
This pulled the country’s unemployment rate down to 5.1 per cent, from 5.2 per cent in the previous three months and the lowest level since October 2005.
“Job creation has been the standout success for the UK economy since the recession,” Ian Stewart, chief economist at Deloitte, said. “Record employment, tumbling unemployment rates and soaring vacancies testify to a job-rich recovery.”
The pound rallied against the dollar after the figures were released, with sterling bouncing back from the seven-year low it had touched before their publication. However, one bleak spot was average weekly earnings, which grew at a weaker pace than expected, pushing real pay growth to its lowest since February.
Annual pay growth, including bonuses, rose by 2 per cent in the three months to November, below economists’ expectation. Excluding bonuses, it slowed to 1.9 per cent.
Sluggish wage growth was one reason that an early rise in interest rates was ruled out by the Bank of England governor on Tuesday. Mark Carney said he was concerned that low inflation was causing employers to offer smaller pay rises as lower prices mean workers are already enjoying a boost. A summary of the Bank of England’s regional agents’ discussions with more than 700 businesses in the UK, which was released yesterday, found that there had been a softening in wage growth due to the effects of low inflation.
Before the economic downturn in the UK, wage growth was growing twice as fast as it is now, leaving economists to believe that interest rates are unlikely to rise this year.
Today’s UK labour market figures showed a further slowdown in wage growth, suggesting that an interest rate rise is still some way off, Ruth Miller, an economist at Capital Economics, said.
Looking at longer term movements, the ONS said that average total pay for employees had increased from £311 a week in January 2000 to £494 a week in November 2015: an increase of 58.7 per cent.
Over the same period, prices have increased by 39.3 per cent.