June 29, 2022

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UK unemployment drops to 50-year low of 3.7%

2 min read

The UK’s unemployment rate has fallen to its lowest in nearly fifty years but workers are still suffering sharp falls in real income as wage growth lags behind soaring inflation.

Figures from the Office for National Statistics (ONS) showed that the country’s jobless rate dropped to 3.7 per cent from 3.8 per cent in the three months to March, the lowest since 1974 and better than economist expectations of no change in the first quarter.

In a further sign that businesses are struggling to recruit, the ONS said that the economy now had more open job vacancies than unemployed people for the first time since records began. The number of vacancies rose to a new record of 1.29 million in April.

Despite the tight labour market, most workers are still failing to secure wage increases in line with inflation, which hit 7 per cent in April and is due to climb to double-digits later this year. The ONS said a measure of weekly earnings growth, that strips out bonuses, rose 4.2 per cent in the first quarter. In real terms, adjusting for inflation, this resulted in a steep 1.2 per cent drop in earnings, the worst fall since 2013.

There is evidence that companies across different sectors are offering bonuses as a way to attract new talent. The ONS’s measure of weekly earnings growth including bonuses hit 7 per cent, accounting for lucrative annual payments made in the financial sector.

“Continued strong bonuses in some sectors such as construction and especially finance mean that total pay is continuing to grow faster than prices on average, but underlying regular earnings are now falling sharply in real terms,” Darren Morgan, director of statistics at the ONS, said.

Economists said the drop in unemployment could be attributed to further falls in the total size of the workforce following the pandemic. The ONS estimates that the size of the UK workforce is about 1 million smaller than if it had continued on pre-pandemic trends.

Pay growth has become a closely watched…

Business Matters

2022-05-17 09:10:58

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