Unemployment falls to lowest level since 1974 but pay still lags behind inflation

Business

Unemployment has fallen to its lowest level since 1974, standing at 3.6% in the three months to July.

The Office for National Statistics said the number of people in employment grew by just 40,000 in the May-July period, but this has not necessarily translated into higher wages.

Regular pay, excluding bonuses grew by 5.2% over the period, but when inflation is taken into account, real pay plummeted by 3.9% year-on-year.

Inflation is currently at a record high, having hit 10.1% in July, fuelled by energy and food costs.

Total pay including bonuses lifted by 5.5% for the three-month period, falling by 3.6% with inflation taken into account.

Average regular pay growth for the private sector was 6.0% in May to July 2022, and 2.0% for the public sector; outside of the height of the coronavirus pandemic period, this is the largest difference seen between the two.

Yael Selfin, chief economist at KPMG UK, said: “Despite the growth in employment, total weekly hours worked fell from the previous quarter, resulting in a drop in average hours.

More from Business

“This suggests that weakening demand has so far led firms to use their staff for fewer hours rather than lay them off, consistent with the relatively low levels of unemployment.

“Pay packets continue to be squeezed as nominal pay growth hasn’t kept up with soaring inflation.

“As long as demand for staff remains high, this could encourage workers to look for better opportunities and secure a higher pay elsewhere.

“However, the window of opportunity could soon narrow if employers review their payrolls in light of a deteriorating outlook.”

Jane Gratton, head of people policy at the British Chambers of Commerce, said: “During a period of increasing inflation, and a stagnant economy, we cannot afford to let recruitment problems further dampen growth.

“The cost-of-doing-business crisis is intensifying the challenges present in the already tight labour market, as it is having a significant impact on firm’s abilities to invest in the workforce. As rising costs force businesses to put investment plans on hold, budgets for people training and development are taking a hit.  

“Government can help by reducing the upfront costs on business and providing training related tax breaks, increasing flexibility in the apprenticeship levy, and ensuring job seekers have access to rapid retraining opportunities. 

“The Shortage Occupation List must also be reformed to include more jobs at more skill levels, to give firms breathing space to train and upskill their workforce.”

TUC general secretary Frances O’Grady said: “Every worker deserves a decent standard of living.

“But as the cost-of-living crisis intensifies, millions of families don’t know how they will make ends meet this winter.

“The new prime minister must get pay rising. Boosting the minimum wage and giving public sector workers a decent pay rise would be a good start.

“And unions should be allowed to go into every workplace to negotiate proper pay rises for all working people.”

Articles You May Like

Man arrested on suspicion of murdering Olivia Pratt-Korbel
As 125 die in stadium violence, ex-Indonesia manager says fans’ passion can have devastating results
Amazon hikes pay for warehouse and delivery workers
Finland to ban Russian tourists over fears of ‘endangering international relations’
Prince William calls for improved online safety after coroner’s ruling in Molly Russell death