While the government may point to the latest employment and unemployment numbers from the Office for National Statistics and label them as a success, there are also worrying trends developing in the figures.
The employment rate for the three months to June was up by 0.3 percent compared to the previous three months and 1.5 percent higher than a year ago. The news on the unemployment rate was also good with those unemployed in the three months to june being down 0.4 percent on the previous three months and 1.4 percent lower than a year ago.
On the economically inactive the picture was not so clear with no change in the last three months but down by 0.4 percent on last year.
But on pay the figures are not so promising. Employee pay including bonuses was 0.2 percent down on last year and pay excluding bonuses was only up by 0.6 percent, which is lower than CPI inflation.
Commenting Martin Beck, senior economic advisor to the EY ITEM Club, said:
“With the MPC set to focus on prospects for pay growth in August’s Inflation Report, today’s labour market data provides further evidence that the relationship between unemployment and earnings has broken down. The number of people in work continues to boom but earnings growth has sunk further.
“The striking fact is that the unemployment rate has now fallen by two percentage points from its 8.4% peak in late 2011, while growth in average earnings has shown no sign of rising over the same period. A plausible argument for this divergence relates in part to a plentiful supply of workers, driven by high levels of inward migration, a rise in the number of older workers and the impact of welfare reform. At the same time, insecurity among existing employees, created by the experience of the recession and the knowledge that firms have plenty of choice when it comes to who they employ, may be keeping a lid on pay demands.
“So the UK economy’s expansion looks set to continue being favourable to job-seekers but less so for those already in work. The good news for everyone is that limited pressure on firms’ bottom lines from pay rises should keep inflation down and stay the MPC’s hand in raising interest rates. So the enemy of so many economic expansions in the past – a wage-led inflationary surge triggering a sharp hike in borrowing costs – seems unlikely to emerge.”
Stephen Timms MP, Labour’s Shadow Employment Minister, said:
“While today’s fall in overall unemployment is welcome, it’s extremely worrying that the figures have shown pay falling far behind inflation, and the change in regular pay being the lowest ever on record. Millions of working people face a cost-of-living crisis which has left them over £1600 worse off since 2010.
“For Iain Duncan Smith to claim that people are 'better off' in the face of these figures shows just how out-of-touch this Tory-led government is.
“A Labour government would extend free childcare provision, freeze gas and electricity bills, raise the minimum wage and build more homes to tackle the cost-of-living crisis. We would also bring in a Compulsory Jobs Guarantee to get the next generation into jobs and tackle the high levels of long term unemployment.”
Andy Chamberlain, Senior Public Affairs Manager at PCG, said:
“The latest ONS statistics show that the number of self-employed professionals in the UK has hit 4.59 million, which means they now account for nearly a fifth of the UK’s workforce. These current trends suggest that by next year there will be more self-employed professionals than people working in the public sector.
“The self-employed continue to drive the economy forward. Not only are independent professionals contributing enormously to the economy, with PCG’s research showing a contribution of £95billion in 2013, this important sector is also going a long way to help bring the unemployment rate down to its lowest rate since 2008.
“The ONS figures back research released this week that the UK is the capital of self-employment in Europe and it’s high time that we recognise, embrace and celebrate this important sector. These enterprising individuals have made the brave decision to go it alone and the economy is reaping the rewards. Let’s continue to make it easier for the growing army of self-employed professionals by implementing tailored policies to help this important sector flourish and reach their full potential.”
Xenios Thrasyvoulou, founder of online freelancer marketplace PeoplePerHour, says:
"The labour market that emerged from the recession is not the same as the pre-crash one."
"There has been a deep and fundamental shift in Britain's workforce. Underemployment surged in the recession, but has continued to rise even as the economy has returned to growth."
"The news of falling wages today will only compound the problem as people struggle to meet the cost of living."
"Many have learnt to sell their skills online. Our online marketplace has seen a 112% increase in people signing up looking to supplement their income in the past year, suggesting this is not just a phase but a profound change in the labour market. The economy may be slowly recovering but that is not yet reaching people’s pockets."
Julie Palmer, Partner at Begbies Traynor, said:
“Despite unemployment levels hitting a six month low in June, this improvement is failing to reach people’s pockets as real wages continue to fall, while recent reports show that more employers are planning to initiate a pay freeze this year to stop operational costs from spiralling out of control.”
“With household spending power already under pressure and a growing number of SMEs overstretching their finances by taking on new staff, many consumers and businesses are only just managing to keep their heads above the water, reinforcing the delicacy of the Bank of England’s impending interest rate decision.”
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