Britain’s employment rate has hit a record high, joblessness is at a 43-year low and wages are rising in real terms for the first time in a year, according to official figures.
With strong job creation, the labour market has been an economic bright spot for years but pay has been weak and the spike in inflation after the Brexit vote affected living standards.
Real earnings started shrinking a year ago, when inflation overtook pay, but the Office for National Statistics says that the trend was reversed in the three months to February. Earnings grew 2.8 per cent while inflation dropped to 2.7 per cent.
Wages are watched closely by economists because consumer spending, one of the key drivers of GDP, is dependent on household finances. The Bank of England is also following pay for signs of inflation before raising interest rates. It is expected to lift them a quarter point to 0.75 per cent next month.
Beyond pay, the broader employment figures provided reason for optimism. The employment rate, which measures the proportion of Britons available for work, hit 75.4 per cent, the highest since records began in 1971 and the third highest among G7 advanced nations. Some 32.26 million Britons have jobs, the highest number ever.
Unemployment fell 16,000 between November and February to 1.42 million, pulling the jobless rate down from 4.3 per cent to 4.2 per cent — its lowest since 1975. Job vacancies remained at roughly 815,000, suggesting that unemployment will continue to fall in the months ahead.
Ian Stewart, the chief economist at Deloitte, said: “For the first time in a year, earnings growth has outstripped inflation. With more people in work than ever, and three quarters of a million unfilled jobs, the stage is set for further rises in earnings through this year.”
Esther McVey, the secretary of state for work and pensions, said: “Another milestone for employment has been reached under this government as employment reaches a record high, up 3.2 million since 2010, the 16th time the employment record has been broken in the same period,” she said.
“That means on average over 1,000 people have moved into work every day since 2010, and credit has to be given to the businesses who have created those jobs and the individuals who are taking those opportunities.”
Philip Hammond, the chancellor, claimed that record employment should help fix the UK’s chronic productivity problem. “We should expect record levels of employment to drive the productivity performance of the UK economy,” he said.
The numbers made an interest rate rise almost certain. “A lot of the detail in the report suggests the labour market is still tightening,” Philip Shaw, an economist with Investec, the banking group, said. “There’s nothing within the numbers to prevent the Bank from raising interest rates in May,” he said.