Unemployment rate hits decade low of 5.1% but wage growth slowsComments Off on Unemployment rate hits decade low of 5.1% but wage growth slows
The number of people out of work has fallen by another 60,000 to its lowest rate for a decade.
The unemployment total dipped to 1.69 million in the final quarter of last year, a rate of 5.1%, the lowest since the end of 2005.
More than 31.4 million people are in work, the highest since records began in 1971, according to the Office for National Statistics.
Average earnings increased by 1.9% in the year to December, 0.2% down on the previous month.
Work and Pensions Secretary Iain Duncan Smith said: “February is another record-breaking month, with the employment rate now at the highest it has ever been and wages continuing to grow.
“At a time when we are seeing the number of workless households at its lowest ever, this is further proof that our economic and welfare reforms are delivering more security.”
But TUC general secretary Frances O’Grady said: “Wage growth remains in the slow lane. Putting money back into people’s pockets is essential to securing a strong recovery.”
Ruth Miller, UK economist at forecasters Capital Economics added that the “surprisingly weak” pay growth meant that there will be no pressure on the Bank of England to raise interest rates “any time soon”.
Separate data from Markit revealed that the number of households expecting the Bank of England to raise its record-low interest rates during the next 12 months has fallen to its lowest in more than two years amid near-zero inflation and growth fears.
Its snapshot showed less than half of respondents expect the Bank’s Monetary Policy Committee to raise rates before February 2017 — down from 71% in November and the lowest since October 2013.
Although wages stripping out bonuses edged higher, the economy is short of reaching the Bank’s criteria for rate rises, including above-trend growth and rising core inflation.
The Bank’s latest inflation report also predicted annual wage growth of 3% this year, well above today’s level.
January figures, meanwhile, show inflation of just 0.3% — well below the BoE’s 2% target — while the central bank expects it to stay below 1% for the rest of the year.
Few economists expect the Bank to raise rates before late this year at the earliest, while financial markets are not pricing in a rate rise until 2019.
Today’s statistics show we’re moving towards our goal of full employment, but with risks out there much more work to do
— George Osborne (@George_Osborne) February 17, 2016
Markit’s household-finance index suggests consumer demand should remain robust, although concerns over job security persist. But experts also warned that wage pressure could quickly return.
ING’s James Knightley said: “The underlying strength of the labour market means that it is only a matter of time before wages start to pick up more meaningfully again.”
Berenberg’s Kallum Pickering added: “With such a strong level of employment, there likely to be only marginal slack left in the labour market.”