United Kingdom: Unemployment rate remains at multi-decade low in April, but real wages fall
June 14, 2017
Jobless claims rose by 7,200 in May according to the Office for National Statistics (ONS), contrasting the revised 22,000 increase observed in the previous month (previously reported: 19,400 increase) and coming in below analysts’ expectations.
The unemployment rate—derived from a different survey—remained at a multi-decade low of 4.6% in April (the latest period for which data is available). The UK labor market is still looking as fit as a fiddle, and has yet to be dented by the uncertainty generated from last year’s EU referendum and an economic slowdown in Q1. Encouragingly, the number of people who are economically inactive is also at the lowest rate since comparable records began in the early 1970s, meaning the fall in the unemployment rate isn’t simply a sign of workers abandoning the jobs market.
However, despite a record number of people in work, this hasn’t generated wage pressures. In the February-April period, regular pay fell by 0.6% in real terms compared to the same period of the previous year, the worst reading since June to August 2014. As a result, average weekly pay in April was below its pre-crisis peak reached over nine years ago. This is in stark contrast to the performance of GDP, which surpassed its pre-crisis peak several years ago, and is likely linked to poor productivity growth and the continuing existence of economic slack. With inflation continuing to rise in May, the squeeze on real wages is only likely to intensify in the coming months.
Author: Oliver Reynolds, Economist