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Real wages fall despite low levels of unemployment Real wages fall despite low levels of unemployment
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The lowest levels of unemployment since the mid 1970s are still failing to boost the bargaining power of workers in the UK, as official figures show a sixth month of negative real earnings. The lowest levels of unemployment since the mid-70s are still failing to boost the bargaining power of workers in the UK, as official figures show a sixth month of negative real earnings.
Average earnings increased by 2.2% in the three months to August, the same level recorded in the three months to July following a revision to the earlier figures, according to the Office for National Statistics. City economists had forecast growth of 2.1%. Average earnings increased by 2.2% in the three months to August, the same level recorded in the three months to July after a revision to the earlier figures, according to the Office for National Statistics. City economists had forecast growth of 2.1%.
When taking account of inflation, the ONS said real wages fell by 0.4% on the previous year, despite the unemployment rate remaining steady at 4.3% – the joint lowest level since 1975.When taking account of inflation, the ONS said real wages fell by 0.4% on the previous year, despite the unemployment rate remaining steady at 4.3% – the joint lowest level since 1975.
The figures will perplex the Bank of England as it prepares for the first interest rate hike in a decade from as early as next month. The central bank has been looking for signs of pay growth, as it seeks to balance a trade-off between supporting jobs and the economy with low rates and cutting the growth in prices. The figures will perplex the Bank of England as it prepares for the first interest rate hike in a decade from as early as next month. The central bank has been looking for signs of pay growth as it seeks to balance a trade-off between supporting jobs and the economy with low rates and cutting the growth in prices.
Howard Archer, chief economic adviser to the EY Item Club, said the data “fail to provide a decisive case” for the Bank to increase the cost of borrowing from 0.25%. “The squeeze on consumers remains appreciable, with obvious negative implications for personal expenditure,” he said. Howard Archer, chief economic adviser to the EY Item Club, said the data “fails to provide a decisive case” for the Bank to increase the cost of borrowing from 0.25%. “The squeeze on consumers remains appreciable, with obvious negative implications for personal expenditure,” he said.
The latest fall in real pay means that average earnings are now no higher than they were in February 2006, despite the economy being 4.4% bigger per person than at that time, according to the Resolution Foundation. The latest fall in real pay means that average earnings are no higher than they were in February 2006, despite the economy being 4.4% bigger per person than at that time, according to the Resolution Foundation.
Stephen Clarke, economic analyst at the thinktank, said: “Today’s figures confirm the big picture trend that the UK labour market is great at creating jobs, but terrible at raising people’s pay.” Stephen Clarke, an economic analyst at the thinktank, said: “Today’s figures confirm the big picture trend that the UK labour market is great at creating jobs, but terrible at raising people’s pay.”
There were some positive signs for Threadneedle Street to seize upon should it look to raise rates at the next meeting of its monetary policy committee in two weeks time. The number of people in work increased by 94,000 in the three months to August 2017 compared with three months ago, although that was at a slower rate than in the previous three months to July. There were some positive signs for Threadneedle Street to seize upon should it look to raise rates at the next meeting of its monetary policy committee in two weeks.
Of the increase in people entering the workforce, 78,000 were women. The total number of people employed full-time increased by 25,000 to 23.56m, while the number of workers on part-time contracts rose by 69,000 to 8.55m. The number of people in work increased by 94,000 in the three months to August 2017 compared with three months ago, although that was at a slower rate than in the previous three months to July.
Economists believe the Bank will probably raise rates even with lacklustre readings on the economy – barring any significant reverse – given the strength of its message in September signalling a desire for a rate hike in the “coming months”. Of the increase in people entering the workforce, 78,000 were women. The total number of people employed full-time increased by 25,000 to 23.56 million, while the number of workers on part-time contracts rose by 69,000 to 8.55 million.
Senior ONS statistician Matt Hughes said: “Many labour market measures continue to strengthen. Employment growth in the latest three-month period was driven mainly by women, with a corresponding drop in inactivity. Vacancies remain robust, at a near-record level. Economists believe the Bank will probably raise rates even with lacklustre readings on the economy – barring any significant reverse – given the strength of its message in September signalling a desire for a rate increase in the “coming months”.
Matt Hughes, a senior ONS statistician, said: “Many labour market measures continue to strengthen. Employment growth in the latest three-month period was driven mainly by women, with a corresponding drop in inactivity. Vacancies remain robust, at a near-record level.