The UK’s jobless rate has fallen to a four-decade low, official figures published on Tuesday said.
Only 4 per cent of those active in the labour market were out of work during the three months to the end of June, the lowest rate since the winter of 1974-75. The record low was 3.4 per cent in 1973.
However, the fall in unemployment failed to lift wage growth. Growth in average weekly earnings fell to 2.4 per cent during the period, down from 2.5 per cent in the three months to the end of May. Analysts had expected the rate to remain steady.
This means that real wages have not grown at all in the past year. Inflation in June was also 2.4 per cent.
Excluding bonuses, which can be volatile, pay grew 2.7 per cent, down from 2.8 per cent in the three months to the end of May and in line with analyst expectations.
Economists credit the fall in unemployment largely to a combination of the UK’s flexible labour market and the increase in the state pension age, resulting in older workers staying in employment for longer.
The labour market figures are the first since the Bank of England raised interest rates earlier this month. The central bank estimates the so-called long-run equilibrium rate of unemployment — the level required for inflation to remain at 2 per cent — is 4.25 per cent.
Bank of England officials predicted in their latest inflation report that the unemployment rate would fall to 4 per cent in the third quarter of 2018 and that tight labour markets should soon lead to a resurgence in wage growth
This fall in unemployment means the ratio of unemployed workers to unfilled jobs has risen to the highest level since the Office for National Statistics started keeping track.
“The number of vacancies is a new record high, while the unemployment rate is now at its lowest since the winter of 1974-75,” said Matt Hughes, senior ONS statistician.
But while there was little sign of a scarcity of workers prompting companies to raise wages, the number of workers on contracts that do not guarantee any working hours fell by 104,000 to 780,000 people.
“For the first time since we started tracking ‘zero-hours’ contracts, we’ve seen a substantial fall in the number of people on one in their main job,” said Mr Hughes.
The data also revealed the largest fall in the number of EU nationals working in the UK since records began in 1997. Compared with the same period a year ago, 2.28m EU nationals were working in the UK, 86,000 fewer than a year earlier.
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