Growth accelerates earnings in UK

 

Between May and July, average earnings excluding bonuses grew 2.9% compared with the same period last year, the Office for National Statistics said.

Unemployment edged up by about 10,000 compared with the previous quarter to 1.82 million.

The unemployment rate was 5.5%, unchanged from the previous quarter but down from 6.2% last year.

Including bonuses, average weekly earnings grew by 2.9%, although this was lower than the 3.3% growth rate seen in the three months to May.

"The long-awaited upturn in pay, which has been the missing element of the UK's economic recovery, looks to be finally upon us, reviving the prospect of a rate hike by the end of the year," said Chris Williamson, chief economist at Markit. 

"Strip out the public sector, and private sector pay rose at an annual rate of 3.4% (both including and excluding bonuses) in the three months to July.

"This is a rate of increase that would normally worry policymakers into a pre-emptive hike in interest rates to avoid upward wage pressures feeding through to higher inflation."

The pound rose against the euro by one cent following the news and was up 0.7 cents against the dollar, indicating that markets are expecting a slightly earlier rise in UK interest rates.

There were 31.09 million people in work, up 42,000 from the previous quarter and 413,000 higher than a year earlier.

The labour market figures are based on the Labour Force Survey, which is country's biggest household survey.

The ONS says that it is 95% confident that the figure for the number of people unemployed is right, give or take 76,000 people.

This means that a rise of 10,000 is well within the margin of error and so is not statistically significant.

The employment rate for those aged 16 to 64 was 73.5%, unchanged from the previous quarter but higher than the 72.8% rate in the same period a year ago.

Chancellor George Osborne said: "It is welcome news that pay packets are rising and jobs are being created. With wages up 2.9% over the year and inflation low, working people have received the fastest real-terms rise in over a decade.

"At 73.5%, the employment rate is the highest it has been."

Labour's shadow work and pensions secretary, Owen Smith, said: "It's welcome news that workers' pay packets are increasing after years of stagnating. However, this is now the third consecutive increase in unemployment and ministers mustn't become complacent about overall joblessness."

"With such low levels of productivity persisting in the workforce and high levels of youth unemployment, the government must do more to bring about an increase in the number of secure jobs in the British economy."