United Kingdom unemployment rate unexpectedly drops to lowest level since 1975

19 May, 2017, 15:13 | Author: Leticia Walters
  • Bank of England agents report slower consumer spending, static wage growth

"However, alarm bells will be ringing for Britons with wages continuing to fall".

Latest figures have revealed that the United Kingdom unemployment rate has fallen to 4.6 per cent, the lowest in 42 years.

Alpesh Paleja, the CBI's principal economist, said: "Weakening productivity and slower pay growth, coupled with rising inflation, will continue to squeeze real household earnings".

Employment has increased by 122,000 to nearly 32 million, the highest since records began in 1971, reported the Office for National Statistics (ONS).

Capital Economics UK economist Paul Hollingsworth says while modest nominal wage growth may not be enough to keep up with inflation this year, which he expects to peak just over 3 per cent, next year is a different story.

Scotland recorded an unemployment rate of 4.4% in the first three months of this year - lower than the rest of the United Kingdom as whole - with the statistics showing employment in the country increased by 5,000.

While the statistics showed employment at a record high, a combination of stagnant wage growth and Tuesday's higher than expected inflation figure suggests United Kingdom households will be hit with a fall in their real income.

The results mean that pay, adjusted for inflation, fell by 0.2 per cent at the start of the year, the first fall since the end of 2014.

Analysis showed that the Urban index rose by 17.62 per cent (year-on-year) in April from 18.27 per cent recorded in March, and the Rural index increased by 16.69 per cent in April from 16.47 per cent in March.

"An astonishing rise in United Kingdom employment isn't enough to mask the fall in real wages", James Smith at ING told the Financial Times. The key measure of wage growth, which excludes bonuses, came in at 2.1 per cent. The latest figures on earnings growth are due out later this week.

Data released on Tuesday showed consumer price inflation picked up speed in April to hit 2.7 per cent and many economists think it will reach 3 per cent soon. The number of unemployed dropped 53,000 to 1.54 million people while of those employed rose 122,000 to a record 31.9 million. "It's also hard to ignore the fact that wages are now growing at a noticeably slower pace than prices".

Some experts though are not so optimistic on the future wage growth.

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