13th May 2015
Employment jumped by 202,000 in the three months to March to a new record high of 31 million.
Unemployment fell by 38,000 in the three months to March to a six-and-a-half year low of 1.8 million, taking the unemployment rate down to 5.5%.
The claimant count fell by a 12,600 in April after a larger drop of 16,700 in March, to a record low of 763,800.
Howard Archer, chief European and UK economist at IHS Global Insight, says: ” We expect the number of jobless to trend steadily downward over the coming months, taking the unemployment rate down to 5.2% by the end of 2015, and to 4.9% by the end of 2016.
“Expected healthy economic growth over the coming months is seen supporting demand for labour, but rising productivity is expected to limit the fall in unemployment.”
He adds: “It is also evident that in some sectors, companies are now finding it harder to get the skilled and experienced workers that they need.
“The Bank of England’s agents in their April report of business conditions commented that “recruitment difficulties had remained somewhat above normal” and cited skill shortages in a number of sectors including construction, engineering, professional services, IT, haulage and healthcare”
Wages on the increase
Underlying earnings growth picked up to 2.7% in March from 2.4% in February, 1.6% in January and a low of 0.5% in April 2014. This was the largest increase since January 2009, which, Archer says, helps the government argue that the recovery is becoming more inclusive and that pay is increasingly being lifted by the improved economic environment. Underlying earnings growth in the private sector improved to 3.3% in March from 2.8% in February and 1.9% in January.
Headline earnings growth improved sharply to 3.3% in March from 1.1% in February helped by higher bonus payments.Annual average earnings growth of 1.9% in the three months to March (the normal neasure used) is 1.9 percentage points above consumer price inflation of 0.0% in March.
Archer adds: “Consumers are seeing a marked pick-up in their purchasing power – which is good news for sustainable decent consumer spending.We expect earnings growth to pick up steadily (but not sharply) over the coming months.”
‘Consumers should beware of over-spending’
Calum Bennie, savings expert at Scottish Friendly, says: “The continuing fall in unemployment will come as a welcome boost to the new Government in its first week, but it should be wary not to be complacent as rising employment does not necessarily mean all is well in the workplace.
“Low wage growth, the ongoing issue of many who feel trapped in zero hour contracts and stumbling UK productivity means that the economy may not be as healthy as many might like. Those who can, should be putting money aside now for what could be more difficult times ahead.
“Rising employment is welcome news but we mustn’t be overconfident and overstretch ourselves when it comes to spending and borrowing.”
Job rich and pay poor
Chris Williams, chief executive of Wealth Horizon, says: “The new Government will hail this fall in unemployment as proof that it is driving the economy in the right direction, but the devil remains in the detail.
“Productivity and wage growth are very lethargic and there is still too much debt in the economy. This means the UK is in danger of being job rich, but pay poor.
“While more people are currently in employment than at any point since the financial crisis, it may not remain this way for too long unless the new Government gives the economy a shot in the arm.”
Sterling hits new high
Andy Scott, associate director of FX advisory services at foreign currency specialists, HiFX, says: “Sterling rose to a fresh high for 2015 against the US dollar, above 1.57 and rose back above 1.40 against the euro on Wednesday following the release of stronger than expected employment data for March.
The unemployment rate fell as expected to 5.5%, its lowest since the middle of 2008. However it was the pickup in average earnings, which increased by 2.2% from the same time last year that drove the move due to the Bank of England’s focus on this inflationary metric.
“The BoE’s quarterly inflation report due out shortly will reveal their latest assessment of the health of the UK economy and the outlook for inflation. Sterling’s recent strength has in part been on renewed expectations that inflation is going to start rising again, causing the bank to refocus on when rate rises will be needed to counter future inflationary pressures.”