Regular pay lagging behind inflation as UK unemployment falls to lowest since 1974 – business live | Business

Darren Morgan, director of economic statistics at the Office for National Statistics (ONS), says the UK labour market is a “mixed picture”.

Although unemployment has dropped, underlying regular earnings are “now falling sharply in real terms.” (ie, after inflation).

For the first time since records began, there are fewer unemployed people than job vacancies, says the ONS.

While the unemployment rate dropped to 3.7%, the lowest since 1974, the number of job vacancies in February to April 2022 rose to a new record of 1,295,000.

That’s 33,700 more than in the previous quarter and an increase of 499,300 from the pre-coronavirus (COVID-19) pandemic level in January to March 2020.

The ONS says:

In January to March 2022 the ratio of unemployed people to every vacancy remained at 1.0 however, for the first time, the number of vacancies was larger than the number of people unemployed.

That could encourage the Bank of England to keep raising interest rates in the coming months, to prevent a wage-price spiral:

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Regular pay in the UK continues to lag behind inflation, as workers – particularly in the public sector – are hit by the cost of living squeeze, even as the unemployment rate hits the lowest since 1974.

Figures just released by the Office for National Statistics show that regular pay (excluding bonuses) rose by 4.2% per year in the three months to March.

That means basic pay shrank in real terms, as CPI inflation hit 7% in March, and may have soared over 9% in April.

But total pay was stronger up – up 7% per year, with bonuses swelling some pay packets.

The Office for National Statistics reports that:

In real terms (adjusted for inflation) in January to March 2022, growth in total pay was 1.4% and regular pay fell on the year at negative 1.2%.

Today’s labour market report also shows a stark difference between workers in the public and private sector.

Average total pay growth for the private sector was 8.2%, but just 1.6% for the public sector.

The finance and business services sector showed the largest growth rate (10.7%), partly because of strong bonus payments, the ONS says.

The jobs report also shows that the UK’s unemployment rate dropped from 3.8% to 3.7% — the lowest since 1974.

The UK’s employment rate increased by 0.1 percentage points on the quarter to 75.7%, while the number of job vacancies remained at a record high.

The data comes a day after Bank of England governor Andrew Bailey reiterated his call for workers to show restraint on wage rises, particularly the better paid.

Bailey told MPs:

“I do think people, particularly people who are on higher earnings, should think and reflect on asking for high wage increases.

It’s a societal question. But I am not preaching about this. It’s not for me to go around telling people what to do.

Unions hit back at Bailey, with Unite saying he should not “lecture” workers about wage restraint.

TUC Deputy General Secretary Paul Nowak pointed out that:

The last thing working people need right now – in the middle of the worst living standards crisis in generations – is to have their wages held down.

With the cost of living crisis intensifying, the CBI is calling for immediate assistance for ‘people facing real hardship’, adding to the pressure on the government to help those hardest hit by Britain’s cost of living crisis.

CBI Director-General, Tony Danker, said the Government must move on two fronts right away.

“The first is to help people facing real hardship now; it’s the moral underpinning of our economy and society. Recent surveys suggest more than one in 10 households have skipped – or had smaller meals – in the past month because of a lack of affordability, while around half a million more households are expected to face choices between heating and eating*. Putting pounds in the pockets of people struggling the most should not be delayed.

“Secondly; start stimulating business investment now – we will need to ensure that there is economic growth in the pipeline to avoid any downturn in our economy that could worsen or prolong the cost-of-living crisis.

European stock markets are set to open higher:

The agenda

• 7am BST: UK labour market report
• 10am BST: Eurozone GDP growth statistics for Q1 2022 (second estimate)
• 1.30pm BST: US retail sales report for Apro;