UK unemployment hits 7-year low

Britain's employment rate has climbed to a fresh record while joblessness is the lowest for almost seven years, a boon for the coalition government just weeks from a general election.

David Cameron seized on the data to urge voters to stick with the Conservatives' "strong leadership and clear economic plan".

The final set of official jobs figures before the May 7 poll suggests the UK's unusually jobs-rich recovery remains on track.

"The UK's employment miracle shows no signs of drawing to a close," said Samuel Tombs, an economist at Capital Economics.

The unemployment rate fell from 5.7 per cent to 5.6 per cent in the three months to the end of February, the lowest since July 2008 and not far from the average pre-crisis rate of 5.3 per cent. Unemployment was 8 per cent the last time the country went to the polls, in 2010.

Meanwhile, the number of people in work topped 31m, pushing the employment rate to 73.4 per cent - the highest since records began in the 1970s. Three-quarters of the new jobs were full-time employee roles.

Rachel Reeves, shadow work and pensions secretary, welcomed the fall in unemployment but tried to turn attention away from the figures and on to the quality of the jobs. Since 2010 people were earning typically £1,600 less in real terms, she said.

The flip side to the UK jobs surge has been terrible productivity and low wage growth, making the government vulnerable to criticism from the opposition Labour party that the economic recovery has failed to make people better off.

After five years of falling real wages, take-home pay has started to rise during the past five months because UK inflation is at zero per cent.

However, there is still little sign of a strong pick-up in nominal pay growth.

Total average pay was 1.7 per cent higher than a year ago, a slightly slower rate of growth than last month's 1.9 per cent. Excluding bonuses, pay was up 1.8 per cent - a small improvement on last month's 1.6 per cent.

Before the financial crisis, average pay typically rose at about 4 per cent a year.

"Weak wage growth remains the bugbear of the economy," said Chris Williamson, an economist at data company Markit. "The weakness of wage growth leaves the consumer-led economic upturn reliant on low inflation to drive household spending, posing a risk to growth if inflation picks up later this year."

The Bank of England expects wage growth to accelerate to 3.5 per cent by the end of the year, but many economists think that is too optimistic.

There are some positive signs: recruitment companies are reporting a sharp increase in advertised starting salaries, particularly for people whose skills are scarce, while official data show more people are quitting their jobs and moving to new ones. That is usually a leading indicator for wage growth.

The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.

In the three months to the end of February, the median pay award was worth just 2 per cent, according to the data provider XpertHR - half a percentage point below the median pay award a year earlier.

The Resolution Foundation, a think-tank, also notes that many of the newly created jobs in the past year have been low paid, such as caring, cleaning and sales assistant roles, which is dragging down average UK pay.

This compositional shift turned what would have been real pay growth of 0.9 per cent in 2014 into a real pay decline of 0.2 per cent, according to the think-tank's calculations.

"Our concern is that rather than reflecting the temporary 'growing pains' of employment recovery, these occupational changes may signal a more permanent phase in which job creation is focused at the lower end of the labour market," said Laura Gardiner, senior research analyst.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation