UK unemployment total falls to 2.16m

Job  centre
The number of people claiming Jobseeker’s Allowance now stands at 1.1 million

The UK jobs market continued to improve in the three months to April, although the rate of wage increases slowed sharply, official figures show.

The number of people out of work fell by 161,000 to 2.16 million, bringing the unemployment rate down to 6.6%.

The number of people in work rose by a record 345,000, to 30.5 million, most of which are in full-time employment.

But the quarterly rate of earnings growth, including bonuses, slowed to 0.7% from 1.9% the previous month.

This was largely due to delayed bonus payments, the Office for National Statistics (ONS) said. Excluding bonuses, pay rose by 0.9%.

The total number of people out of work is now at its lowest level for more than five years, with youth unemployment, which covers 16-24 year olds, standing at 853,000.

The number of people claiming Jobseeker’s Allowance in May fell by 27,400 to 1.09 million, the ONS said.

Prime Minister David Cameron tweeted that the government had reached a “major milestone” in its long term economic plan, with “two million new private sector jobs since 2010”.

Labour’s shadow work and pensions secretary Rachel Reeves said the slowing rise in wage increases meant that “even people in work are struggling to make ends meet”.

Signs of strength

The continuing improvement in the jobs market in the three months to April was due mainly to jobs created in the private sector.

The number of jobs lost in the public sector was 103,000, but much of this this was down to the reclassification of employees of Lloyds bank from the public to the private sector. Taking out the Lloyds workers, 11,000 jobs were lost in the public sector.

There were 5.4 million people employed in the public sector and 25.1 million in the private sector, up 447,000 on the previous three-month period.

“The rise in employment this month is concentrated in full-time employees, not self-employment, which in the past has been used to ‘talk down’ the strength of the rise,” said David Tinsley at BNP Paribas.

“Indeed, there was a sharp fall in the proportion of people working part-time who say they are doing so because they can’t find a full-time job, which is one of the Bank of England’s favourite metrics of disguised slack.”

Wage ‘concern’

Analysts said the ONS figures sent mixed messages to the Bank of England’s interest rate-setting committee.

“Labour market strength is the driving force behind calls for interest rate increases from the Bank of England, sooner rather than later, and today’s figures will add fuel to their fire,” said Jeremy Cook, chief economist at World First.

“However, wage growth has fallen to 0.7%, versus an expected 1.2%, and this is still a major cause for concern. As a result I am still expecting the Bank to hold policy right through into the second quarter of 2015, mainly courtesy of the lack of real wage increases.”

The inflation rate in the UK currently stands at 1.8%, meaning wages are increasing at a slower rate than prices.

“Weak pay growth and the ‘cost of living crisis’ remains the Achilles heel of the economic recovery,” said Chris Williamson, chief economist at Markit.

“But it should not be long until we see earnings growth accelerate as the labour market continues to tighten. Pay growth should pick up in coming months, perhaps significantly.”

The figures for unemployment in the three months to April are based on the Labour Force Survey, in which the ONS speaks to 60,000 households once a quarter, making it the country’s biggest household survey.

The ONS is 95% confident that the figure of a 161,000 fall in unemployment is correct to plus or minus 85,000 people.