Disappointing pay figures show why Chancellor can't take credit for rise in real wages

The Office for National Statistics (ONS) has this morning released the latest set of UK labour market data. These mostly cover the three months November 2014 to January 2015 but also include estimates for public and private sector employment in Q4 2014.

The jobs figures continue to be strong, with employment up 143,000 on the quarter (to a total of 30.94 million people in work) and unemployment down 102,000 (to 1.86 million). The working age employment rate has reached a new record of 73.3%. Full-timers account for more than two thirds of the quarterly rise in employment, all the net rise due to more employees in employment (the number of self-employed fell by 9,000). Excluding the effect of major statistical reclassifications, the number of people employed in the private sector increased by 148,000 to 25.64 million in the final quarter of 2014, while the number employed in the public sector fell by 5,000 to 5.23 million.  

There was a quarterly fall in both the unemployment rate (down from 6% to 5.7%) and the working age inactivity rate (down from 22.3 to 22.2%). The number of people long-term unemployed (i.e. unemployed for more than 12 months) fell by 55,000 in the quarter (to 629,000). Youth unemployment fell by 12,000 to 743,000 in the quarter and has now fallen below 500,000 if full-time students are excluded from the total (the overall youth unemployment rate down from 16.6% to 16.2%). The number of people claiming Jobseeker’s Allowance fell by 31,000 to just over 791,000 in the month to February 2015.  

But the average weekly earnings figures disappoint yet again, the rate of growth in both average weekly total pay (down from 2.1% to 1.8%) and regular pay (i.e. excluding bonuses, down from 1.7% to 1.6%) slowing slightly. Although pay is now growing faster than the 0.3% rate of consumer price inflation this nonetheless dents Chancellor of the Exchequer George Osborne’s positive Budget day narrative. Real wages are rising only because low global oil prices, which Mr Osborne can't take credit for, are pushing the economy toward zero inflation; in our high employment/low productivity jobs market pay packets still aren't benefiting from the so-called ‘long-term economic plan’.