UK jobless rate hits 48-year low as people quit labour market – iNews

The UK’s unemployment rate dropped to the lowest since 1974 latest figures show but wages continued to lag behind inflation.
Pressure on wages came as official figures showed that the number of UK workers on payrolls rose by 71,000 or 0.2 per cent, between July and August to 29.7 million, the Office for National Satistics (ONS) said.
The economic inactivity rate – measuring those not in work and not looking for work – increased by 0.4 percentage points on the quarter to 21.7 per cent, its highest since the three months to January 2017.
The drop was driven by an increase in people classified as long-term sick as well as students leaving the jobs market. The Bank of England is worried about labour inactivity fearing a tight labour market will fuel inflation.
The ONS said regular pay, excluding bonuses, grew by 5.2 per cent over the three months to July. However, with Consumer Prices Index (CPI) inflation taken into account, real pay tumbled by 3.9 per cent year-on-year.
Average regular pay in the public sector rose by just 2.0 per cent in May-July. Private sector workers saw pay rise three times as fast – with average regular pay growth of 6.0 per cent.
CPI inflation jumped to a fresh 40-year high of 10.1 per cent in July as energy and food bills sent living costs spiralling upwards.
The figures come as the Financial Times reported chancellor Kwasi Kwarteng reportedly told Treasury officials to adapt to a new approach focused on boosting annual economic growth to 2.5 per cent, as he prepares to unveil a tax-cutting mini-Budget next week.
The Government’s recent move to freeze energy bills at £2,500 is expected to rein in an inflationary peak but wages are still unlikely to keep pace with rising costs.
The ONS added that total pay including bonuses lifted by 5.5 per cent for the three-month period, falling by 3.6 per cent with inflation taken into account.
Kitty Ussher, Chief Economist at the Institute of Directors, said: “Just when we thought unemployment couldn’t get any lower, it has fallen further to an extraordinary 3.6 per cent in the 3 months to July, the lowest rate since 1974.
“This is good news for households trying to budget in the face of rising costs. Although the effect of inflation has caused real pay to fall – by 2.8 per cent on the year, causing difficulties for many – the jolt to family budgets from high unemployment would be significantly worse.
“More disturbing is the continuing rise in economic inactivity. Some of this is due to having more students, but also to increasing numbers of over-50s being denied the ability to work due to long-term illness.
“For businesses, low unemployment means labour shortages remain a very real concern. Having said that, today’s data also suggests some firms are pausing recruitment plans in the face of a weakening economy: the number of vacancies, although still very high, has started to come down.”
Tony Wilson, Director at the Institute for Employment Studies said the latest figures should be “sounding alarm bells in government, with the number of people out of work due to long-term ill health now rising faster than at any point in at least three decades.
“This is happening despite there being well over a million vacancies in the economy and unemployment at its lowest in most of our lifetimes. Yet there are still more than half a million more people out of work than there were before the pandemic began and firms simply can’t find the workers to fill their jobs.
“This is holding back growth but also pushing up inflation, with pay growth in the private sector now running above 6% and contributing to even higher prices. Of course inflation is even higher still, which combined with anaemic public sector pay means that earnings in real terms have fallen for the ninth month in a row.
“This weak jobs recovery is being driven by more people out of work due to long-term ill health, up by 350 thousand since the pandemic and by 130 thousand in the last three months alone. NHS waiting lists, poor mental health, a lack of specialist employment support and long covid will all be playing a part in this, but whatever the reasons we need to do far more to help those with ill health to prepare for, find and keep work.
For a government that wants to cut taxes to boost growth, the figures also spell trouble. If we don’t do more to help more people into work, then any tax cuts will just lead to even higher inflation and higher interest rates for longer.”
Jack Kennedy, at the global job site Indeed, said: “While many people’s thoughts may be elsewhere at the moment, the cost-of-living crisis continues to be reflected in a squeeze on real terms pay. Despite historically strong nominal regular pay growth, real wages were down -2.8% on the year – one of the largest falls on record.
“There remains extreme tightness with vacancies nonetheless remaining near record levels and economic inactivity reversing its recent falls to rise to its highest level since 2016. This was caused by people at opposite ends of the career ladder; largely driven by those aged 16 to 24 years and those aged 50 to 64 years. This participation gap in the labour market means hiring became even more challenging for employers.”
All rights reserved. © 2021 Associated Newspapers Limited.


Leave a Comment