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News | Published July 16 2019

UK wage growth up to 3.6 per cent in "tight" labour market

The Office for National Statistics has revealed the highest rate of wage growth in the UK for 11 years, with a 3.6 per cent rise in the year up to May 2019.

Up to the end of May, a record 32.75 million people were in work with only 1.29 million unemployed; a 27-year low .

The unemployment rate is officially 3.8 per cent, the joint-lowest since January of 1975.

Yet employment growth has also slowed down with a modest 28,000 increase, with some firms thought to be holding back on taking on more staff because of the new Brexit deadline of October 31.

Within this period, the ONS recorded an 80.2 per cent employment rate for men and a 72 per cent rate for women; the joint-highest since records began in 1971. 

Ian Stewart, chief economist at Deloitte, said that the jobs market has reacted atypically to a growth slowdown, but warned that such respite may only prove to be short-term. 

Stewart said: "The jobs market seems to have defied gravity, with wages rising and unemployment falling even as growth has slowed. But the big questions is how long that can last.

"With job vacancies edging lower and firms more cautious on hiring, the pace of job creation could slow from here." 

The statistics also revealed that wages continue to remain higher then the rate of inflation, and ONS deputy head of labour market statistics, Matt Hughes, called the market “strong”.

Hughes added: “The number of self-employed part-timers has passed one and a half million for the first time, well over double what it was 25 years ago.

“Regular pay is growing at its fastest for nearly 11 years in cash terms, and its quickest for over three years after taking account of inflation".

Lower-income employees in the retail, wholesale, hospitality and catering industries have also become better off since the introduction of the National Living Wage and National Minimum Wage, with the average regular pay pre-tax and deductions estimated to be £503 per week. This also came alongside a pay rise for NHS staff.

However, when the rate of inflation is taken into account, average pay is adjusted to £468 a week, which is £5 below the pre-recession peak recorded in April 2008.

Alpesh Paleja, principal economist of the CBI lobby group, called the statistics "encouraging" in a "tight" labour market, but remains concerned about productivity.

Paleja said: “Despite signs that employment growth is tailing off, the labour market remains tight, with the unemployment rate at a multi-decade low.

"It's encouraging that pay growth has picked up further, putting more money in people's pockets, but as recent data shows productivity remains in the doldrums.”


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Authored by

Scott Challinor
Business Editor
@theparlreview
July 16 2019

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