Employment may be rising at a record rate but wages are going nowhere

The labour market looks to be in increasingly rude health as unemployment falls to 6.6%, but wages are stagnating again.

by Rachel Savage
Last Updated: 17 Jun 2014

Employment is rising at a record rate, unemployment is still falling, there are more young people in work - time for a celebration one might think. However, it’s not time to crack out the party poppers: wage growth has, once again, fallen below inflation.

The number of people in work rose 345,000 to 30.45 million in the three months to April, the biggest quarterly rise since the Office for National Statistics started keeping records back in 1971. The employment rate is now 72.9%, just 0.1% below the pre-financial crisis level.

Unemployment fell by 161,000 to 2.16 million, the lowest level since January 2009. That brings the unemployment rate down to 6.6% from 6.8% in the three months to March, as it continues its steady march further below the 7% rate that Bank of England governor Mark Carney said last year could trigger an interest rate rise, before he hastily backpedalled.

However, wages seem to be conspiring against the sunshine and rainbows beaming from the rest of the economic data. Annual wage growth in the quarter fell to 0.7% from 1.9% in the three months to March, well below April’s inflation rate of 1.8%.

The ONS laid much of the blame on a sharp drop in bonuses compared to last year, when many companies delayed payouts until April to take advantage of a top-rate tax cut. However, unless wages get going again soon the month where we thought we were getting richer will seem like a distant blip.

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