Pressures has eased on the Bank of England to raise interest rates after the latest official figures showed a fall in wage inflation despite a fresh drop in unemployment.
Both measures of earnings growth – including and excluding bonuses – edged lower in the three months to the end of April, according to the Office for National Statistics.
The Bank’s latest quarterly inflation report signalled that the fall in unemployment to its lowest level since the 1970s would lead to stronger earnings growth and necessitate a gradual increase in borrowing costs from 0.5%.
As a result, financial markets have been gearing up for an August increase in interest rates to coincide with the publication of the next inflation report.
The ONS’s report on the state of the labour market said unemployment had dropped by 38,000 in the three months to April, leaving the jobless total at 1.42 million.
The unchanged unemployment rate of 4.2% was the lowest since 1975, while the proportion of the population of 16- to 64-year-olds in work – 75.6% – was the highest since modern records began in 1971.
Even though the economy barely grew in early 2018, the ONS said there were 146,000 more people in work between February and April than in the previous three months.
Despite the healthier jobs outlook, however, earnings growth including bonuses dipped by 0.1 points to 2.5%, while earnings growth excluding bonuses dipped by a similar amount to 2.8%.
Although earnings are rising slightly faster than prices, the TUC general secretary, Frances O’Grady, said: “Wage growth is stuck in the slow lane. At this rate pay packets won’t recover to their pre-recession levels for years.
“We need to speed things up. Extending collective bargaining would boost living standards and help workers get a fairer share of the wealth they create. Ministers must allow unions the right to go into every workplace.”
Jeremy Thomson-Cook, the chief economist at WorldFirst, said: “The juxtaposition of today’s increase in the employment rate to a record 75.6% and yesterday’s news of lay-offs at both Poundworld and Jaguar Land Rover will be lost on nobody and we think that today’s jobs report could soon be revealed as a high water mark for job creation.”