Following news that CPI inflation held steady at 2.3 percent in March, today’s labour market numbers from the ONS revealed wage growth in the three months to February also came in at 2.3 percent, meaning real wage growth now stands at zero. Ben Brettell, Senior Economist, Hargreaves Lansdown:
With inflation forecast to carry on rising – the Bank of England predicts a peak around 2.8 percent early next year – real wages are likely to start falling soon, squeezing household budgets. The UK economy is heavily reliant on consumer spending and this could prove a headwind for economic growth as we move through the year. Notwithstanding relatively weak wage growth, the UK labour market looks fairly robust – for now at least.
The employment rate and the number of vacancies are at record highs, while the unemployment rate is unchanged at 4.7 percent – the last time it was lower was in 1975. Unemployment is expected to rise later this year as Brexit-related uncertainty deters firms from hiring more workers, but at least any rise will be from historically low levels.
The claimant count, which in a quirk of the data is a more recent figure than the unemployment rate, showed the number of unemployment benefit claimants rose by 25,500 to 765,400 in March, the largest increase since July 2011. Economists had expected a small fall. The claimant count figure is often viewed as an early warning signal of a potential economic downturn, so this surprise increase could be a sign that labour market conditions are about to become tougher.