New high in UK employment but wages stagnant

The Office for National Statistics (ONS) has released new figures that show employment in the UK is at an all time high but wage rises are lagging behind.The number in work climbed by 181,000 between May and July to a record 32.13 million, representing an employment rate of 75.3 per cent, also a record. Meanwhile, unemployment fell by 75,000 to a 12-year low of 1.46 million over the quarter.

Earnings remain static in real terms

On the down side, the ONS said earnings remained static with an annual growth rate of 2.1 per cent, well below the latest 2.9 per cent rise in the retail price index (RPI).Matt Hughes, senior ONS statistician, said, "Another record high employment rate and record low inactivity rate suggest the labour market continues to be strong."In particular, the number of people aged 16 to 64 not in the labour force because they are looking after family or home is the lowest since records began, at less than 2.1 million."Despite earnings rising by 2.1 per cent in cash terms over the last year, the real value of people's earnings is down 0.4 per cent."

'More to do' in creating jobs

Employment Minister Damian Hinds said the country should celebrate its success in continuing to create jobs, although he conceded there was "more to do".“The strength of the economy is helping people of all ages find work, from someone starting their first job after leaving education, to those who might be starting a new career later in life.“Britain’s employment success is largely about a growth in full-time and permanent work, as employers invest in Britain and offer quality job opportunities that put more money into people’s pockets.“But there is more to do, and we will continue to build on our achievements through our employment programmes and the work of Jobcentre Plus.”Matthew Percival, head of employment at the Confederation of British Industry, commented, “The labour market puzzle has intensified – employment growth has quickened while pay growth has waned, continuing the squeeze on household incomes.“Businesses need the confidence to invest to help deliver a sustainable improvement in productivity and wages. It’s therefore absolutely vital that substantive progress is achieved during the Brexit negotiations and comprehensive, time-limited transitional arrangements are agreed with all urgency.”Tom Purvis, IPSE economic policy adviser, commented, “Today’s figures show the continuing strength and success of the UK labour market. This success can be attributed to more and more people opting to become self-employed.“Being self-employed can be hard work, but research has shown that the majority enjoy what they do. Our research shows that when people make the decision to go self-employed, very few would consider giving it up for a job where someone else is your boss.“At a time when the UK economy has to navigate its way through Brexit, it is imperative that we continue to promote a flexible UK labour market. It has been responsible for almost half of the recent growth in the labour market as a whole and this development needs to be supported.”

UK jobs market remains resilient

Suren Thiru, head of economics at the British Chambers of Commerce, said, "The continued rise in employment, coupled with falling unemployment, is further evidence that the UK jobs market remains resilient, with firms continuing to recruit despite a softening economic picture."It is concerning that the number of vacancies remains well above the historical average – a further indication of the continued skills shortage faced by business, which is weighing on productivity and growth prospects. Our latest research found that half of UK firms had faced skills or labour shortages over the past year."A key priority for the autumn Budget must be to support firms looking to recruit and grow their business, including tackling the high up-front taxes and costs of doing business in the UK."As the Brexit process unfolds, a key focus must be on delivering a post-Brexit immigration system that reflects the needs of the UK economy."

Concerns over lack of improvement in productivity

Economists also remain concerned about the failure to improve productivity in the economy. Ben Brettell, senior economist at Hargreaves Lansdown, said, "The only sustainable driver of real wage growth is increasing productivity – and in this respect the UK continues to lag behind its developed-world counterparts, notably the US and Germany. Unless a solution to this productivity puzzle is found, a meaningful improvement in living standards could be some way off."Prof Geraint Johnes, director of research at the Work Foundation at Lancaster University, added, "There have been particularly large gains in accommodation and food services, consistent with the boost to domestic tourism provided by the weak pound, and also in information and communication services."Employment in real estate activities and in professional, scientific and technical services has declined over the quarter."Prof Johnes said feared UK wage growth would remain elusive. "Indeed, the rapid rise in employment suggests that productivity growth remains hard to come by, and this will continue to put limits on pay growth," he said.For related news and features, visit our HR section.Access hundreds of global services and suppliers in our Online Directory  Get access to our free Global Mobility Toolkit

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