ONS: Unemployment falls, wages stagnate

Thursday 23 April 2015

The Office for National Statistics (ONS) has revealed that the number of people out of work in the UK has hit its lowest level since 2008 - in part thanks to the impact of self-employment and other flexible working arrangements.

The unemployment rate fell to 5.6 per cent in the three months to February, and the number of people claiming Jobseeker’s Allowance dropped by 20,700 to 772,400 in March.

The overall employment rate is now 73.4 per cent: the highest figure since records began in 1971. This means that 31 million people in the UK are now in work.

The chancellor George Osborne welcomed the news, and told the Guardian: “The British economy is a job-creating machine.”

 

He also claimed that the government was responsible for creating two million jobs over the course of the current Parliament.

 

Of the new jobs created, 61 per cent have been taken by UK citizens. However, 1.3 million people told the ONS that they had taken part time jobs because they were unable to find full-time work - an increase of 29,000 compared with the previous quarter.

 

Average wages are also on the rise, although somewhat slower than economists had expected. For the year to February, pay rose by 1.7 per cent (including bonuses) across the country, compared to the 1.8 per cent increase predicted by a Reuters poll of economic experts.

 

The private sector is currently showing the strongest growth, recording an average pay rise of 2.2 per cent. At present, the private sector represents 80 per cent of the UK’s employment opportunities, following cuts made to public sector jobs by the coalition government.

 

Thanks to a continuing zero per cent inflation rate, these figures also represent the rate of pay increases in real terms. Despite these improvements, average household income is still two per cent lower in real terms than it was five years ago.

 

This means that sole traders and contractors have a strong opportunity to benefit from the growing economic confidence and translate their skills into increased personal income, all the more so since self-employment rates are remaining largely static at 4.5 million.

However, Chris Williamson, an economist at Markit, expressed some concerns about the structure of the present recover. He said: “The number of people in employment has risen to an all-time high, but the jobs boom and wider economic recovery are still not feeding through to households via higher wages.

“The lack of wage growth leaves the economy vulnerable to setbacks, especially as growth has once again become all-too dependent on consumer spending, which is in turn reliant on low inflation.”

Mr Osborne defended his strategy, but acknowledged that there was more work to do to ensure that the UK’s economy can fully thrive, saying: “The challenge over the longer term is to improve education and develop skills. But I would prefer to have a productivity problem than an unemployment problem.”

However, the largely positive state of the labour market will be reassuring for people in a variety of professions, particularly given increased uncertainty as the country approaches May’s general election.


By Victoria McDonnell

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