Unemployment rate falls as wage rises accelerate

Wednesday 13 May 2015

The UK's unemployment rate is continuing to fall, according to the latest figures from the Office for National Statistics (ONS), which also reveal that wage rises are now accelerating.

Estimates for January to March 2015 maintain the general direction of movement since late 2011 to early 2012, and also compare favourably to figures for October to December 2014.

Overall, there were 31.10 million people in work in the first quarter of 2015, which is 202,000 more than for Q4 2014, and 564,000 more than for a year earlier.

Furthermore, the proportion of people aged from 16 to 64 who are in work is 73.5 per cent, which represents the highest since comparable records began more than four decades ago, in 1971.

There are now 1.83 million unemployed people in the UK, which is 35,000 fewer than for October to December 2014, and the smallest quarterly fall since June to August 2013.

Comparing January to March 2015 with a year earlier, there were 386,000 fewer unemployed people, while there are 8.98 million people aged from 16 to 64 who are out of work and not seeking or available to work; 69,000 fewer than for October to December 2014.

Furthermore, when comparing January to March 2015 with 12 months earlier, pay for employees in Great Britain increased by 1.9 per cent including bonuses, and by 2.2 per cent excluding bonuses.

Despite uncertain business surveys from the construction and manufacturing industries last week, jobs continue to be added in these sectors and others, noted Jeremy Cook, chief economist at payments company World First.

However, he noted that salary growth is arguably more important in order to sustain the recovery.

"It is the increase in wages that’s crucial for the UK economy moving forward. We have long called real wage increases a 'silver bullet' for the UK recovery," Mr Cook explained.

He stated that real wage increases come from "optimistic employers happy with business conditions" and enable the re-balancing of spending figures, as well as promoting growth in generalised output.

Meanwhile, Howard Archer, UK and Europe economist at IHS Global Insight, said he expects unemployment to trend steadily downward over the coming months, taking the rate down to 5.2 per cent by the end of 2015, and to 4.9 per cent by the end of 2016.

"Healthy economic growth over the coming months is seen supporting demand for labour, but rising productivity is expected to limit the fall in unemployment," he added.

However, Mr Archer warned that in some sectors companies are now finding it harder to attract the skilled and experienced workers that they need.

He also pointed to the Bank of England's April 2015 report, which noted that recruitment difficulties have remained "somewhat above normal", with skill shortages in sectors including construction, engineering, professional services and IT.
Despite this, the largely positive state of the labour market will reassure contractors in a variety of professions, particularly given the increased uncertainty witnessed as the country approached the General Election.

By Victoria McDonnell

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