Unemployment has fallen to its lowest level in over 40 years but pay growth is also slowing rapidly – and is already negative in parts of the economy – the Resolution Foundation says in response to the latest ONS labour market figures.
Employment remained at a record 74.6 per cent, while unemployment fell to 4.7 per cent.
But the welcome news on jobs is not translating into stronger pay growth. Real earnings growth fell to 0.8 per cent in the three months to January, compared to two per cent just seven months ago.
New Resolution Foundation analysis following today’s figures projects that it will fall to 0.2 per cent next month before turning negative during the course of 2017.
The Resolution Foundation notes that earnings are already falling in some sectors including manufacturing, education, professional activities, finance, real estate and mining.
Laura Gardiner, senior policy analyst at the Resolution Foundation, says, ‘On jobs the UK economy continues to perform well, with employment remaining at a record high and unemployment hitting a 41-year low.
‘But this labour market tightening is not feeding through into wage pressure with all the signs now pointing to an end to Britain’s short lived pay recovery. Weak pay rises and rising inflation mean that a fresh squeeze is due later this year, and has already begun for some workers, especially in the public sector.
‘The incredibly poor outlook for pay has pushed a return to pre-crash earnings back well into the next parliament, making the 2010s the weakest decade for pay growth since the Napoleonic wars.’
Neil Owen, director, Robert Half Technology, says, ‘As organisations focus on transforming their businesses and navigating political change in a competitive marketplace, it’s encouraging to see that we are ending the financial year on a positive note.
‘Yet with the rise in employment, the shortage of skilled workers continues. We are seeing strong demand from private and publicly listed companies for tech talent that can support growth initiatives and candidates that can manage regulatory, risk and compliance demands by acting as financial partners to the business.
‘In a competitive job market, hiring is one of the most important decisions that a company can make. Any delays to the process can lead to businesses losing out on top talent and having to start the search process from scratch. Businesses need to streamline their recruitment processes, reduce the time that it takes to hire and create flexible remuneration packages to attract the right resource and support future growth.’
Further reading on unemployment
