The Office for National Statistics (ONS) has released the latest set of UK labour market data, mostly covering the three months March to May 2014.
The state of Britain’s jobs market gets more puzzling by the month. The number of people in work has increased by a further 254,000 to 30.64 million and the employment rate – the proportion of the working age population in work – has reached a record equalling 73.1%, higher than the pre-recession peak, while the unemployment rate has fallen to 6.5% (2.12 million) even though more people are entering the market to look for work. Full-time employees account for the bulk of the latest increase. Underemployment (i.e. part-timers who want a full-time job), though still very high, fell by 61,000 to 1.360 million. As well as the overall fall in unemployment, the number of jobless 16-24 year olds has fallen by 64,000, long-term unemployment is down 33,000, and the count of jobless people in receipt of Jobseeker’s Allowance fell by just over 36,000 in May. Meanwhile the level of job vacancies continues to rise and is now only 48,000 lower than the pre-recession high.
However, whereas one would normally expect all this good news on jobs to be reflected in bigger pay increases as the labour market tightens, the annual rate of growth of total pay for employees in cash terms is still running at only 0.3%, while regular pay (stripping out the effect of bonus payments) is rising by just 0.7% per year, the slowest annual rate of growth since comparable records began in 2001, resulting in an even tougher bite on real earnings and living standards (the CPI inflation rate was 1.5% at the time the latest pay data were compiled in May, though the rate increased to 1.9% in June).
The British jobs market is therefore at present something of an oddity: a record equalling employment rate, yet with cash pay rises at a record low and a real wage squeeze that is still biting hard. We should be celebrating an economy clearly on the fast track back to full employment. But full employment without stronger growth in pay and productivity is not the kind of full employment to hang out the bunting for.