UK employment rises to fresh high

Britain's workers enjoyed slightly faster pay growth than expected in the first quarter of this year, while unemployment fell and the employment rate rose to a fresh high.

Official data published on Wednesday suggest the UK's jobs boom has continued into the first quarter of 2015. They also offer some hope that wage growth - long missing from the economic recovery - is beginning to pick up.

Average weekly pay between January and March (excluding bonuses) was 2.2 per cent higher than the same time a year ago, the highest annual growth rate since mid-2011. Total pay (including bonuses) was 1.9 per cent higher. The figures were slightly higher than economists had expected, although they remain much lower than average wage growth before the financial crisis of about 4 per cent a year.

John Philpott of the Jobs Economist consultancy said the "most encouraging [news] of all" was that pay was rising fastest in low wage sectors, averaging 3.1 per cent in wholesaling, retail, hotels and restaurants.

After six years of falling real wages, the pick-up in nominal pay growth, along with the fact inflation has dropped to zero per cent, means workers' living standards are beginning to rise again.

Meanwhile the employment rate rose from 73.4 to 73.5 per cent, a fresh record, and the unemployment rate fell to 5.5 per cent, the lowest since mid-2008.

"Since the unemployment rate is now just a whisker above its average of 5.3 per cent seen in the decade before the recession, it is unsurprising that pay growth is beginning to recover," said Samuel Tombs, an economist at Capital Economics. "Since faster wage growth has not been accompanied by a recovery in productivity, this pick-up might soon start to concern the Bank of England's Monetary Policy Committee."

The MPC presents its quarterly Inflation Report on Wednesday morning, where it will offer more information on how soon it thinks interest rates will need to rise from their record lows.

Wage growth without any accompanying rise in productivity might lead them to raise rates sooner, because it implies that inflationary pressures are building in the economy.

George Osborne, the newly re-elected chancellor of the Conservative government, said the jobs data were "further proof the plan is working with unemployment falling, record numbers of people in work and confirmation that regular pay packets are growing at their fastest in four years, putting more in people's pockets and stretching family budgets that bit further."

The Conservatives see Britain's "jobs miracle" as one of their biggest successes and they want to repeat the feat by creating another 2m jobs by 2020, which would increase the employment rate from a record 73.4 per cent to 76.6 per cent, the highest in the G7 group of rich countries.

However, the Office for Budget Responsibility, the official fiscal watchdog, forecasts employment will rise just half as fast as the Tories hope.

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