UK unemployment declined by 146,000 to 6.2% in the 3-month period ending in July, according to figures published by the Office for National Statistics. Unemployment is at its lowest rate since 2008.
The number of Brits claiming Jobseeker’s Allowance dropped by 37,200 to 966,500 in August. To be eligible for Jobseekers’ Allowance (JSA) a claimant must state that he/she is actively seeking employment by completing a form and attending an interview. They must also go to a Job Centre once every two weeks to “sign on”.
The last time the number of people claiming JSA fell below one million was in 2008.
Average weekly pay (excl. bonuses) during the 3-month period ending in July increased by 0.7% compared to the same period in 2013. Including bonuses, average income grew 0.6%, which is still way below the 1.5% annual inflation rate.
It is difficult to currently make annual pay-with-bonus comparisons because of the timing of City bonuses last year, which were largely deferred to take advantage of a reduction in the top income tax rate to 45% from 50%.
While unemployment, which fell by 468,000 over the past 12 months, posted a 6-year record fall, the number of people in employment increased by just 74,000 to 30.61 million, the smallest rise since June 2013.
The Chancellor George Osborne welcomed today’s figures, but Labour’s shadow employment minister Stephen Timms pointed to “pay falling far behind the cost of living.”
Mr. Timms said:
“Pay excluding bonuses today is the lowest on record. Under this government wages after inflation have already fallen by over £1,600 a year since 2010 and by next year working people will have seen the biggest fall in wages of any Parliament since 1874.”
Bank of England’s dilemma
Economists say the UK has two conflicting figures, making it difficult for the Bank of England to know when to act on interest rates:
- Unemployment has fallen rapidly, suggesting a tightening labor market, but
- Earnings growth is still very weak, indicating that there is still a lot of slack in the labor market.
At the Bank of England’s Monetary Policy Committee (MPC) meeting on September 3-4, there was a split when deciding whether to hold or raise interest rates. Martin Weale and Ian McCafferty wanted to increase the benchmark rate from 0.5% to 0.75%, but the other seven members voted to hold.
In August, the UK’s central bank halved its forecast for average wage increases, adjusting its forecast for average salary rises for 2014 to just 1.25%.
Economists point out that unlike recent quarters, the latest new jobs were nearly all part-time positions.