Wage growth is back with a bang as unemployment falls below 7pc

Perhaps finally an ease to consumer budgets, and a chance that the "cost of living crisis" meme may start to fade away.

For the first time since July 2009, the Office for National Statistics' measure of average earnings growth may now exceed headline inflation.

Yesterday saw headline consumer price inflation fall to a four and a half year low of 1.6 per cent in the year to March, down from 1.7 per cent.

Average earnings growth has come in at 1.7 per cent for the three months to February, equal to that month's inflation figure. The volatile single month figure for earnings growth showed a 1.9 per cent rise in February - exceeding inflation and signalling the real wage growth we've been waiting for.

This shouldn't be a temporary phenomenon - Capital Economics' Paul Hollingsworth says that survey measures of workers' pay "continue to point to a strong pick-up in earnings growth."  But despite this, the headline three month measure excluding bonuses is up just 1.4 per cent, and real earnings remain 10 per cent below their 2008 peak. Our economics reporter Michael Bird writes that analysts fear we face a lost decade for earnings.

Simultaneously, the latest unemployment data sees the headline level of unemployment falling below the seven per cent level. Unemployment was last sub-seven per cent more than five years ago, and was seen at 6.9 per cent in the three months to February. That's down from 7.2 per cent last month. Analysts had been forecasting a drop to 7.1 per cent. The claimant count fell by 30,4000 in the month of March.

At below seven per cent, the unemployment rate is now where the Bank of England had said it would consider hiking interest rates, before it introduced a more qualitative form of guidance. Societe Generale's Kit Juckes call the figures we've seen this morning "unambiguously strong data."

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