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UK unemployment falls again but wage growth slows UK unemployment at five-year low amid jobs boom
(about 7 hours later)
Unemployment has fallen to its lowest level in more than five years but wage growth slowed to 1.3%, excluding bonuses, denting hopes that the long running cost of living crisis many be at an end. Britain's jobs boom accelerated in the first three months of the year as unemployment reached a five-year low, fuelled by a surge in self-employed workers.
When bonuses are added, average weekly earnings in the three months to March rose by 1.7%, above the inflation rate of 1.6%. But excluding bonuses the increase was 1.3%, dragged down by a 1% month-on-month fall in weekly wages. Employment accelerated at the fastest pace in 43 years to reach 30.4 million people, after the number of those in work jumped by 283,000 over the last three months. However, the business secretary, Vince Cable, said the figures were a warning that the UK labour market was becoming too flexible.
The number of people in work reached a record high, fuelled by more self-employment. More than 30.4 million people are now in work – the highest since records began in 1971 – while self-employment has also reached a record high of more than 4.5 million. Much of the demand appeared to be for low-paid work after figures showed the rise in the number of self-employed people since last summer kept up its strong run. The number of self-employed people in the UK has risen by 375,000 since March 2013 to nearly 4.6 million, according to the latest Office for National Statistics data, outstripping the 351,000-strong increase in full- and part-time employees in the private and public sectors.
The Office for National Statistics said a fall in unemployment continued and the number of economically inactive people aged from 16 to 64 "continue the general direction of movement over the past two years". Meanwhile, the unemployment rate fell to 6.8% from the 6.9% announced last month, the lowest since February 2009.
The number of people in work kept up its steady rise after the total in a job rose 283,000 in the last three months, while unemployment fell to 2.21 million, down 133,000 on the previous quarter and 309,000 fewer than a year earlier. The underlying employment trends could delay the Bank of England's first hike in interest rates, with studies showing that pay levels among the self-employed are around 40% lower than for employed people and are dragging down average pay rates.
However, the stellar rise in the number of self-employed people kept up its strong run. A rise in the number of employees by 351,000 to reach 25.63 million was superseded by the number of self-employed people, whose numbers swelled by 375,000 to reach 4.55 million. The debate over the rise of self-employment back to 1970s levels came as ONS figures showed that average weekly earnings in the three months to March increased by 1.7% once bonuses were included, ahead of CPI inflation at 1.6%. It was the second successive monthly ONS announcement that has seen wages outstrip inflation, in a boost to George Osborne's attempts to neutralise the cost of living as a serious election issue. The month-on-month figure between February and March, however, showed an increase in earnings of just 1%.
It is a trend that could delay the Bank of England's first hike in interest rates, especially as studies show pay levels among the self-employed are around 40% lower than for employed people and are dragging down the average pay rates. But TUC general secretary, Frances O'Grady, said the decline in real wages for most workers – wages rose 1.4% once bonuses were stripped out - was "a real concern" and "a reminder to the Bank of England that this is not a full-blown recovery, and that an early rise in interest rates could choke off growth".
Separate figures for pay rises from Income Data Services have shown pay deals, especially at major companies running at above 2%, illustrating a widening gap between those in full-time paid employment and a growing army of self employed people on lower incomes. In a speech to the Resolution Foundation think tank, Cable warned on the prevailing employment trend. He said: "We have to confront the possibility that labour markets may be becoming too flexible," he said. "Too much flexibility, and we undermine the incentive to be more productive."
Ian Stewart, chief economist at Deloitte, said: "Britain's job-rich recovery is still not feeding through to greater consumer spending power. Cable is the first government minister to voice concerns that the UK's flexible labour market may be encouraging firms to hire cheap workers as an alternative to investing in more productive processes.
"But today's strong jobs numbers signal that we are close to a turning point. We expect to see real earnings rise in the second half of 2014 for the first time in more than four years." The business secretary said the recovery would be on a firmer footing when falls in unemployment and higher levels of vacancies pushed wages consistently above inflation and improved living standards.
Minister for employment Esther McVey said: "As the recovery takes hold, more people are able to get a job or set up their own business and become the employers of tomorrow. Each and every person who has made a new start or hired someone new is helping to make Britain a more prosperous and confident place to be. Minister for employment Esther McVey was more positive about workers who were setting up on their own "to become the employers of tomorrow".
"We will continue to support those in and out of work who want to get on and fulfil their ambitions for a more secure future." She said: "Each and every person who has made a new start or hired someone new is helping to make Britain a more prosperous and confident place to be."