Share

UK real earnings fall despite lowest unemployment since 1975

London - British consumers are continuing to see their spending power eroded by feeble wage increases and the rising cost of living, despite unemployment falling to a 42-year low.

Regular earnings rose 2% in the three months through May from a year earlier, up slightly from April but well behind the rate of inflation, the Office for National Statistics said. As a result, real pay fell by 0.5%.

That figure is forecast to turn increasingly negative as consumer-price inflation pushes past 3%, driven by the fall in the pound since the Brexit vote.

Pay remained subdued even though the latest three months saw healthy demand for labour. Unemployment fell 64 000, taking the jobless rate to 4.5% - the Bank of England’s (BoE) equilibrium rate. Employment climbed 175 000, the most since the end of 2015, to a record 32 million. The number of unemployed people per vacancy fell to a record-low 1.9.

“Despite the strong jobs picture, there has been another real-terms fall in total earnings, with the growth in weekly wages low and inflation still rising,” said ONS statistician Matt Hughes.

The figures underscore the dilemma that has split Bank of England policy makers over whether to raise interest rates.

The squeeze on living standards is sapping consumer spending, the engine of the British economy, yet a three-person minority pushed for an increase last month to curb inflation.

Wait and See

Governor Mark Carney says he is waiting to see how the economy responds to the start of Brexit talks and whether investment picks up to compensate for the downturn in consumer spending, a development seen as unlikely by many economists.

The wage data will also increase pressure on Prime Minister Theresa May, who has been facing calls to lift a pay cap for millions of government workers after she lost her parliamentary majority last month.

Earnings in the public sector rose 1.4% in the latest three months. Private-sector pay increased 2.2%.

Total pay including bonuses rose 1.8%, the least since the end of 2014. Adjusted for inflation, it fell 0.7%, the biggest drop since August 2014. The ONS said the figures were affected by the timing of bonuses payment, which posted a 2.3% drop on the year.

SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.

Read Fin24's top stories trending on Twitter:

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.94
-0.2%
Rand - Pound
23.91
-0.1%
Rand - Euro
20.43
+0.2%
Rand - Aus dollar
12.34
+0.1%
Rand - Yen
0.13
-0.2%
Platinum
910.50
+1.5%
Palladium
1,011.50
+1.0%
Gold
2,221.35
+1.2%
Silver
24.87
+0.9%
Brent Crude
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.8%
Resource 10
57,251
+2.8%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders