Unemployment below 7% for the first time in years but earnings figures show pay pressures remain
Commenting on this month’s Labour Market Statistics released by the Office for National Statistics, Mark Beatson, CIPD chief economist, said: “The latest statistics show that jobs growth in the labour market remains strong, with employment increasing by 239,000 in the three months December 2013-February 2014 and a fall of 77,000 in unemployment, which is now below 7% for the first time in exactly five years. The unemployment figures, in particular, have varied from month to month recently. These are three month average figures based on sample surveys and they will vary from month to month. The important point is that the trend is still for more jobs and less jobless.
“The February 2014 figures on average earnings growth require some explanation. The three month average growth rate for total weekly earnings in the year to February 2014 – which is the measure the ONS highlight because it removes some of the month-to-month variation – equalled the February 2014 measure of headline inflation – both standing at 1.7%. This is the first time this has happened since April 2010. The single month annual growth rate for average earnings was 1.9%, which was higher than headline inflation, and this last happened in April 2013.
“We need to remember that this closing of the gap is more due to inflation falling faster than expected as it is to higher earnings growth. The interpretation placed on these figures also depends on the measure of inflation chosen as Retail Price Index-based measures of inflation remain at 2% or higher. Nor has the increase in earnings growth been across the board. Higher bonuses have been a factor and the growth rate of regular pay, at 1.4%, is still below all measures of inflation. Earnings growth has also been concentrated of late in wholesale and retail, hotels and restaurants, manufacturing and construction and may in part be due to more hours being worked rather than an increase in hourly pay. Pay awards in general are not showing signs of significant acceleration and if headline inflation remains below 2% this year that might take the edge off any build up in pressure on employers.
Until we see clear evidence that business and consumer confidence are delivering investment and improved productivity, we are unlikely to see significant increases in real hourly pay.”