Wednesday 17 May 2017

UK Unemployment At Lowest Level Since 1975


Employment hit a record high in March and joblessness fell to its lowest level since 1975 as Britain’s businesses kept on hiring more workers.

A total of 31.95m people are now in work - the highest level on record - which amounts to 74.8pc of 16 to 64-year olds, also an unprecedented high, according to data from the Office for National Statistics.

Unemployment fell to 4.6pc in the three months to April, the lowest level since 1975. That means there are currently 1.54m people out of work, the lowest number since 2005.

There are also more vacancies on offer than ever before with 777,000 jobs advertised from February to April, indicating companies want to hire more staff in the months ahead.

But pay increased at 2.4pc in the year to March, falling behind prices, which rose by 2.7pc in April.

Excluding bonuses the picture was even more downbeat, with regular weekly pay rising by only 2.1pc year-on-year.

The Bank of England hoped that pay would start rising once unemployment fell to around 4.5pc, but there are few signs of this happening yet - even though the apparently strong demand for workers and low unemployment rate would usually push employers to pay more.

“We continue to think that this tightening will deliver a modest rise in nominal wage growth over the course of this year," said Paul Hollingsworth at Capital Economics. "It might not be enough to keep up with inflation, which we expect to peak at just over 3pc in the fourth quarter.

“However, as inflation begins to fall back next year as the upward pressures from the drop in the pound start to fade, we think real wages will begin to rise again. As a result, the forthcoming squeeze on real wage growth should be nowhere near as severe or prolonged as that seen after the financial crisis.”

It came as separate Bank of England data showed pay deals remained subdued "across the economy".

The Bank's monthly agents’ report, which gathers the opinions of 700 businesses across the UK, said consumers were cutting back on spending amid a squeeze in their incomes due to higher inflation.

Some labour costs were rising, particularly in manufacturing, but the Bank data showed pay deals were barely keeping up with price growth.

"Pay awards remained clustered around 2pc and 2.5pc across the economy," it said.

Around 40pc of pay deals are negotiated in April, the Bank has previously noted.

Official data on Tuesday showed inflation climbed to 2.7pc in the year to April - its highest since mid-2013. Many economists expect the rate to hit 3pc in the coming months.

While the fall in the value of the pound since the Brexit vote has pushed up inflation, there were further signs that it is boosting Britain's competitiveness.

"Consumer spending growth had moderated in real terms, as spending power had been hit by higher prices," the Bank said.

"But manufacturing export growth had risen. That had mostly reflected the effects of the earlier decline in sterling."

The Bank said manufacturing output had strengthened over the past month amid rising demand at home and abroad, driven by the automotive and aerospace sector.

The Bank's survey of 300 businesses showed most expected further export growth in the coming year - both in value and volume terms.

Goods exporters were particularly upbeat, with respondents citing the fall in the value of the pound and optimism about entry into new markets expected to push up export values, even as uncertainty over the UK's future relationship with the EU exerts a drag.

Respondents to the Bank 's survey said their availability to do business in new markets would be the "most important factor" affecting future export growth over the medium term.

There were also signs that companies are more willing to invest, which the Bank said was consistent with "modest growth in spending over the year ahead".

Bank of England Governor Mark Carney said last week that many companies remained hesitant to plough cash into new projects while the UK's future relationship with the EU remained uncertain.

"We see some pick-up in investment and some positive contribution from net trade for most of the forecast, but it’s not booming," he said.

The economy slowed down in the first quarter of the year even as employment rose strongly, so the amount of value produced per hour of work - a key measure of productivity - fell by 0.5pc. That is the first fall since late 2015, and reverses the 0.4pc rise in the measure in the final quarter of 2016.

Productivity growth is crucial to long-term improvements in wages and living standards, so the poor performance in the UK, and many developed economies, is a concern to analysts and policymakers.

Employment overall rose by 112,000 compared with the previous month, and by 381,000 on the year.

Most of the new workers - 91,000 on the month - found full-time jobs, while 21,000 gained part-time jobs.

Of the 8.5m part-time workers in the UK, only 12.4pc said they want a full-time job but have been unable to find one - the smallest proportion since 2009.



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