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UK employment surges but wages lag behind inflation UK employment surges but wages lag behind inflation
(about 1 hour later)
Employment rose by a record 345,000 in the three months to April but Britain's workers were squeezed by a dramatic slowdown in pay growth, official figures showed.Employment rose by a record 345,000 in the three months to April but Britain's workers were squeezed by a dramatic slowdown in pay growth, official figures showed.
The number of people in work stood at 30.54 million, according to the Office for National Statistics (ONS), after a rise which was the highest since records began in 1971.The number of people in work stood at 30.54 million, according to the Office for National Statistics (ONS), after a rise which was the highest since records began in 1971.
It means 780,000 jobs have been added since a year earlier, the biggest annual rise since 1989. It means 780,000 jobs have been added in the past 12 months, the biggest annual rise since 1989.
But pay growth for the period slowed to 0.7%, a sharp fall on last month's figure of 1.7%, blunting hopes of a return to a period of real-terms pay growth.But pay growth for the period slowed to 0.7%, a sharp fall on last month's figure of 1.7%, blunting hopes of a return to a period of real-terms pay growth.
The increase was well below the latest inflation rate of 1.8%, meaning the cost of living is still going up more quickly than pay packets. The increase was well below the latest inflation rate of 1.8%, meaning the cost of living is still going up more quickly than wages.
This slowdown in total pay was largely accounted for by bonuses, which fell sharply compared with a period last year when in many cases they were deferred to April as tax changes were introduced. This slowdown in total pay was largely accounted for by bonuses, which fell sharply compared with a period last year when in many were deferred to April after tax changes were introduced.
But regular pay growth also slowed, to 0.9% from 1.3%.But regular pay growth also slowed, to 0.9% from 1.3%.
Unemployment fell by 161,000 to 2.16 million, with the jobless rate dropping to 6.6%.Unemployment fell by 161,000 to 2.16 million, with the jobless rate dropping to 6.6%.
Pay growth briefly edged higher than inflation in the spring, marking a break in years of falling real wages and providing a boost to the Conservatives as they seek to take the squeeze on household budgets off the pre-election agenda. Pay growth briefly edged higher than inflation in the spring, marking a break from years of falling real wages and providing a boost to the Conservatives as they seek to take the squeeze on household budgets off the pre-election agenda.
TUC general secretary Frances O'Grady said the government had prematurely declared an end to Britain's cost of living crisis. " It's great that more people are joining the workforce but hugely worrying that workers are still not getting the decent pay rises they need to get by. The TUC general secretary, Frances O'Grady, said the government had prematurely declared an end to Britain's cost of living crisis. "It's great that more people are joining the workforce but hugely worrying that workers are still not getting the decent pay rises they need to get by.
"The news that the economy is returning to its pre-crash size will be of cold comfort to the millions of workers who are still thousands of pounds a year worse off compared to five years ago."The news that the economy is returning to its pre-crash size will be of cold comfort to the millions of workers who are still thousands of pounds a year worse off compared to five years ago.
"With pay rises falling below one per cent, an early interest rise could cause major problems for millions of mortgage-holders.""With pay rises falling below one per cent, an early interest rise could cause major problems for millions of mortgage-holders."
Jeremy Cook, chief economist at foreign exchange broker World First, said the wage figures showed there was still slack in the economy, despite the strength of increase in full-time jobs.Jeremy Cook, chief economist at foreign exchange broker World First, said the wage figures showed there was still slack in the economy, despite the strength of increase in full-time jobs.
"Labour market strength is the driving force behind calls for interest rate increases from the Bank of England, sooner rather than later, and today's figures will add fuel to their fire," he said."Labour market strength is the driving force behind calls for interest rate increases from the Bank of England, sooner rather than later, and today's figures will add fuel to their fire," he said.
"However, wage growth has fallen to 0.7%, versus the 1.2% expected, and this is still a major cause for concern. As a result I am still expecting the Bank of England to hold policy right through into the second quarter of 2015, mainly courtesy of the lack of real wage increases.""However, wage growth has fallen to 0.7%, versus the 1.2% expected, and this is still a major cause for concern. As a result I am still expecting the Bank of England to hold policy right through into the second quarter of 2015, mainly courtesy of the lack of real wage increases."
Minister for employment, Esther McVey said businesses were feeling increasingly confident about creating jobs, cutting the number of young people out of work and reducing the numbers of long term unemployed. Employment minister Esther McVey said businesses were feeling increasingly confident about creating jobs, cutting the number of young people out of work and reducing the numbers of long term unemployed.
"Helping young people to get a job is vital to securing our economic future, so it's welcome that youth unemployment has continued to fall – we'll continue to do all we can to inspire the next generation of employers and business leaders and help them to build their careers.""Helping young people to get a job is vital to securing our economic future, so it's welcome that youth unemployment has continued to fall – we'll continue to do all we can to inspire the next generation of employers and business leaders and help them to build their careers."
Economists are divided over how soon consistent growth in real wages will return, particularly given the uncertainty around how much of the growth seen in employment is into low-paid, insecure self-employment or part-time work. They warn that for now the data will look gloomy.Economists are divided over how soon consistent growth in real wages will return, particularly given the uncertainty around how much of the growth seen in employment is into low-paid, insecure self-employment or part-time work. They warn that for now the data will look gloomy.