The UK’s jobs boom roared on today after figures showed a 44-year low in unemployment and rising pay packets.
The number of people in work rose 99,000 in the quarter to March, pushing the unemployment rate to 3.8%, the lowest since 1974, according to figures from the Office for National Statistics.
The employment rate is 76.1%, up from 75.6%, the joint-highest on record.
With wages outpacing inflation and unemployment continuing its downward trend, joblessness has been falling for the past five years. The figures could put more pressure on the Bank of England, staying its hand due to uncertainty over the UK’s EU exit, to hike interest rates.
Threadneedle Street is expecting wage growth of 3.5% to 4% over the longer term, but given its pace the Bank could be forced to take some steam out of the economy.
“We don’t currently expect a rate hike this year, but following some recent hawkish comments from Governor [Mark] Carney, we wouldn’t completely rule out some further tightening in November if either a Brexit deal is ratified, or more likely, Article 50 is extended further,” said ING’s James Smith.
Basic pay rose 3.3% for the first three months of the year before adjusting for inflation, one of the fastest paces of growth in a decade. Inflation adjusted it was 1.5% higher than a year ago.
Much of the recent pay growth has been driven by a skills shortage in certain sectors such as building and hospitality, economists say.
The Institute of Directors senior economist Tej Parikh said: “The competition to attract talent has pushed up wages to the benefit of households over recent months, but we would expect salaries to be growing faster given the prevailing low rates of unemployment.
“Businesses are facing a slew of higher costs and weak productivity growth, which limits their wiggle room to up pay packets.”
There was some good news for firms facing labour shortages as the number of EU nationals working in the UK rose to a record high of 2.38 million, despite Brexit. The 98,000 gain from a year earlier was driven by Bulgarians and Romanians.
