UK employment remains at record high but wage growth slips

Published by Stephen Little on 14 May 2019.
Last updated on 14 May 2019

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The UK employment rate remained at a record high in the three months to March, although wage growth fell.

Wages rose by 3.2% in the three months to March, slightly down on the previous month’s figure of 3.5% but still outstripping inflation, according to the Office for National Statistics (ONS).

The number of people in work rose by 99,000 in the three months to March to reach a new record high of on the quarter to 32.7 million, while the employment rate remained at 76.1% of the working-age population - the joint-highest figure on record.

Companies have preferred to take on labour rather than commit costly investments, given the uncertain economic and political outlook due to Brexit, according to analysts.

Howard Archer, chief economic adviser at EY ITEM Club, says: “Earnings growth is now showing signs of at least temporarily slipping back after trending up through the second half of 2018 when the tight labour market appeared finally to be having some upward impact on pay.”

UK unemployment fell 3.8% to 1.3 million – 119,000 fewer than for a year earlier and 914,000 fewer than for five years earlier.

The ONS says that employment rates for men and women aged between 16 and 64 years have been generally increasing since early 2012.

For women, this is due partly to changes to the state pension age for women, resulting in fewer women retiring between the ages of 60 and 65 years.

Tej Parikh, senior economist at the Institute of Directors, says: “The labour market remains in fine fettle, and continues to break new ground.

“Businesses have steadfastly expanded their workforce whilst the fog of uncertainty clouds longer-term investment decisions. After a long period of relentless hiring, however, the momentum behind employment growth appears to be slowing as there are fewer workers available to fill skyrocketing vacancies.

"Firms are having difficulties recruiting right across the board, from engineering technicians to hospitality staff.

“The jobs boom has no doubt kept the economy ticking along but for many businesses progress on skills, training and education policy could not come sooner.”

Ben Brettell, senior economist at Hargreaves Lansdown, says the ‘British disease’ of low productivity is a spectre which continues to haunt us.

He says: “There are valid concerns that UK firms are hoarding labour instead of much-needed capital expenditure.

“Why would you invest large sums in new plant or machinery in such uncertain times, when you could hire an extra worker and get broadly the same result?”

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Interesting article about tax

Interesting article about tax account. In a quickly changing electronic age it is good to know as much as you can about your own financial affairs.