Britain’s unemployment rate has fallen to a new year 42-year low, official data showed on Wednesday, but wages growth remains far below overall inflation. The unemployment rate fell to 4.3% in the quarter through to the end of July, reaching the lowest level since 1975, the Office for National Statistics (ONS) said in a statement. It had stood at 4.4% in the three months to June.
Employment reached a new record high of 32.1 million workers, as the number of people in jobs increased by 181,000 in the three months to July 2017. A total of 1.46 million people were recorded unemployed at the end of July, down 175,000 on a year earlier.
But growth in wages continue to lag behind Britain’s annual inflation rate, which ONS statistics on Tuesday showed had jumped to 2.9% in August from 2.6% in July. Average weekly earnings rose by 2.1% year-on-year in the three-month period to July.
The combination of rising inflation and stagnating wage growth meant that real wages fell by 0.4%, further reducing purchasing power in the UK.
“Job creation is a huge UK success story,” said Ian Stewart, chief economist at Deloitte. “Despite Brexit uncertainties and slower growth, the UK continues to generate ever lower unemployment and ever more jobs.”
Despite the strong jobs growth, there is concern that weak wages growth is starting to hurt consumption, reducing the chances of interest rate tightening from the Bank of England that would give a lift to savers.
The UK government signaled its intention to raise salaries for all public sector workers by more than a 1% cap in place during several years of state austerity. The first to benefit are police officers, who will see their pay increase by 2%, and prison officers, who are receiving a 1.7% hike. But the POA prison officer union branded the move a pay cut in real terms, reflecting a wider frustration at loss of purchasing power in the UK.