Wednesday 14 June 2017

UK pay squeeze starting to feel more like a bite

We knew the UK was entering another prolonged period of falling real wages but the latest official Jobs Report from the Office for National Statistics suggests the squeeze is starting to feel more like a bite. The growth rate of average weekly earnings excluding bonuses slowed to just 1.7% in cash terms in April and fell by 0.6% when adjusted for the corresponding rate of consumer price inflation. The nominal and real figures including bonuses were 2.1% and -0.4% respectively.

What’s remarkable is that pay growth, however measured, is so weak at a time when employment is at joint record rate of 74.8%, unemployment at a 42 year low of 4.6%, and the working age inactivity rate down to 26.5%. 

Moreover the rise in employment in the latest quarter is driven almost entirely by relatively strong growth in full-time jobs for employees on permanent contracts. This, on the face of things, doesn't look like a surge in the so-called gig economy. The total rise of 109,000 in the number of people in work in the three months to April comprised a rise of 196,000 employees working full-time, a fall of 69,000 employees working part-time, a fall of 24,000 full-time self-employed and a rise of 26,000 part-time self-employed. The number of temporary employees fell by 17,000 and the number of part-time workers unable to find a full time job fell by 39,000. All the net employment growth in the first quarter was in the private sector.

However, despite the overall very positive news on jobs the weak and weakening pay figures are the key take-away from today's ONS report. Hard times for people in work and near full employment make strange bedfellows, highlighting the extent to which a de-regulated labour market with an abundance of workers available to fill low wage vacancies has altered the UK jobs landscape.        

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