Employment is at a record high, unemployment is falling and wages are rising ahead of inflation, according to data released by the ONS this morning. Meanwhile the Bank of England have given their latest assessment of the UK economy in their quarterly inflation report. Laith Khalaf, Senior Analyst, Hargreaves Lansdown.
Employment rate at record high; average wages rise by 2.2 percent and Bank of England strikes cautious note on wage growth.
The labour market data paints a picture of an economy on the up. Unemployment has fallen back, and most of the jobs added to the economy in the last year have been full-time. The employment rate has hit a record high, and while some of this is due to a rising state pension age for women, it shows the economy is absorbing these extra workers.”
“There is now clear daylight between the rate of pay rises and inflation which means more money in consumers’ pockets to spend on goods and to pay down debt. This positive data will encourage the Bank of England to consider pulling the trigger on interest rates sooner rather than later, but with inflation so subdued they aren’t likely to unhook the safety catch just yet.”
On that front today’s inflation report gives mixed signals. The central bank anticipates solid economic growth in the UK, however they have lowered their expectations for wage growth, a key ingredient in the interest rate decision. Those obsessing about which month rates are going to finally rise might well be missing the wood for the trees. Whenever they come, interest rate rises are likely to be more tortoise than hare, with the market pencilling in a rate of just 1.4 percent by the middle of 2018.”
Labour Market data (ONS) – key highlights
The employment ratehit a record high in the first quarter of 2015 of 73.5 percent, the highest level since records began in 1971. There were 31.10 million people in work, up 564,000 on the first quarter of last year. The unemployment rate fell to 5.5 percent. This was down from the last reading of 5.7 percent and down from 6.8 percent a year ago. There were 1.83 million unemployed individuals in the first quarter of 2015.
Average regular payrose by 2.2 percent between the first quarter of 2014 and 2015. This was the highest annual growth rate recorded since the second quarter of 2011. Average total pay (including bonuses) rose by 1.9 percent between the first quarter of 2014 and 2015. 80 percent of jobs created over the last year were full time positions. Public sector employment stood at a record low of 5.4 million people in December 2014, but comparable records only began in 1999. Self-employed workers fell by 67,000 over the year to the first quarter of 2015 to sit at 4.5 million.