UK unemployment is at its lowest since 1975 - but wage growth has dipped again

 
Emma Haslett
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The number of part-time roles fell as firms sought more full-time workers (Source: Getty)

UK unemployment fell to its lowest since 1975 in the three months to the end of February - but wage growth fell again, suggesting workers are about to be hit by a "perfect storm" of high inflation and weakening pay increases.

Figures published by the Office for National Statistics (ONS) showed unemployment fell to 4.7 per cent in the three months to February, down from 5.1 per cent a year earlier.

However, average weekly earnings excluding bonuses rose 2.2 per cent, or 0.1 per cent adjusted for inflation, the slowest since 2014. Yesterday the ONS said prices rose 2.3 per cent in April, the second month in a row it has passed the Bank of England's two per cent targets.

The figures showed demand for workers has increased, with vacancies rising 2.1 per cent between the final quarter of 2016 and the first quarter of 2017. And full-time work also increased, with the number of full-time hours worked rising by 146,200, while part time hours fell by 107,200.

"Households are being caught in a perfect storm of rising inflation and slowing labour income growth," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

"The small upside surprise from wages has boosted sterling, but the details look much less impressive. Year-over-year growth in wages excluding bonuses fell to 1.9 per cent, from 2.2 per cent, dragging down the ex-bonus headline rate to 2.2 per cent, from 2.4 per cent.

"The continued weakness of core wage growth bolsters the view of the majority of monetary policy committee members that interest rates do not need to rise this year in order to combat inflation."

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