Wage inflation at lowest level since 2001

17 June 2009

The number of people out of work rose to 2.261 million between February and April, from 2.22 million during the previous three-month period.

The number of people claiming benefits also rose by 389,300 over May, to 1.54 million. This means 726,100 additional people are now claiming benefits compared to the same month in 2008 – the highest figure since 1995.

Although unemployment continues to rise, the latest increase was smaller than expect - Philip Shaw, economist at Investec Securities, says these are actually the best, or "least worst", figures since July last year.

"Our best guess is that firms laid workers off early during the economic cycle because of cash flow constraints," he adds. "Hence the signs of improvement in the economy seem to be resulting in layoffs tailing away somewhat more promptly than expected."

Shaw believes that unemployment will now peak at under (rather than other) three million this year.

But Vicky Redwood, UK economist at Capital Economics, is not convinced - and she warns unemployment could "easily surpass" three million before the end of 2010. 

While 29.11 million people remained in employment during the three-months to April, this is down 271,000 over the quarter and 399,000 over the year. The Office for National Statistics (ONS) says this is the largest quarterly fall in the number of people in employment since comparable records began in 1971.

For those people who are still in employment, the recession is taking its toll on wages, with average earnings including bonuses increasing by just 0.8% over the three-month period compared to a rise of 2.7% in the same quarter in 2008. This is the lowest annual growth rate for earnings excluding bonuses since comparable records began in 2001, according to the ONS. 

The number of jobs experienced a significant 108,000 fall between December 2008 and March 2009, with the manufacturing sector taking the biggest hit with a fall of 78,000. Vacancies, meanwhile, dropped by 38,000 over the quarter and 230,000 over the year. Finance and business positions experienced the largest fall.

The lack of vacant positions is forcing many people to seek employment outside their chosen profession. McDonald’s – despite its low-paid McJob image – is reportedly receiving 2,200 applications a day, with every vacancy pursued by around 16 people.

Every job advertised at the Jobcentre, meanwhile, is attracting around seven applicants, up from just two at the end of last year.

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