Employment boost and pay growth ease pressure on households

Updated: 

Employment has reached an all-time high and pay growth picked up pace, easing the pressure on cash-strapped households confronted by higher inflation.

The Office for National Statistics (ONS) said the number of people in work rose by 125,000 to 32.07 million in the three months to June, with the employment rate climbing by 0.3% to a record 75.1%.

Annual growth in wages was 2.1% for April to June, up from a revised figure of 1.9% for March to May.

Once bonuses are stripped out, pay expanded by 2.1% over the period, rising from 2%.

However, once inflation is taken into account, total pay in real terms sank by 0.5% both including and excluding bonuses.

It comes as the cost of living - which has marched higher in response to the Brexit-hit pound - held steady at 2.6% in July, in line with the rate for June.

ONS senior labour market statistician Matt Hughes said: "The employment picture remains strong, with a new record high employment rate and another fall in the unemployment rate.

"Despite the strong jobs picture, however, real earnings continue to decline."

The jobs market remained a bright spot for the economy, with the unemployment rate dropping by 0.2% to 4.4% for the three months to June, its lowest level since 1975.

The number of people out of work dropped by 57,000 on the quarter to 1.48 million - a 12-year low.

Meanwhile, the so-called claimant count fell by 4,200 in July to 807,800.

Employment Minister Damian Hinds said: "These statistics show that record levels of people are in work across the country and earning a wage, which is great news.

"Over the past year the rise in employment has been overwhelmingly driven by permanent and full-time jobs, as employers continue to invest in Britain's strong economy.

"The task now is to build on this success through Jobcentre Plus and our employment programmes so that everybody can benefit from the opportunities being created."

Sterling, which has been in the doldrums this week, bounced on the news.

The pound was up 0.2% against the dollar at 1.28 US dollars, while the British currency flirted with 1.10 euros, up 0.3% on the day.

TUC general secretary Frances O'Grady said: "Rising prices and stagnant pay are a toxic combination for working people. This is the fourth month in a row where wages have fallen behind the cost of living.

"Ministers are sitting on their hands as another living standards crisis unfolds. It's time to boost wages by scrapping the pay restrictions in the public sector, investing in infrastructure, and increasing the minimum wage."

Howard Archer, chief economic adviser to the EY Item Club, said: "Worryingly for consumers, higher employment is still not translating into higher pay as inflation hovers close to 3%.

"Thus the squeeze on consumers remains appreciable, with obvious negative implications for personal expenditure.

"Anaemic earnings growth is a key factor arguing against any near-term Bank of England interest rate hike, and the latest data keep this argument firmly in place - along with recent largely disappointing UK economic developments."

Focusing on zero-hours contracts, the ONS said the number of people employed in those jobs had fallen by 20,000 to 883,000 on the year.