Listen to this article
The UK’s near six-year squeeze on real earnings is easing but the recent strong trend of job creation has slowed, official data showed on Wednesday.
The unemployment rate was 7.2 per cent of the workforce in the three months to January, the Office for National Statistics said, one of a mixed set of labour market figures before George Osborne revealed his Budget.
That was unchanged on the figure for October to December published last month, but down 0.2 percentage points on the previous quarter, which the ONS regards as a more robust comparison.
The number of jobless was 2.33m, down 63,000 on the quarter.
Average earnings rose 1.4 per cent in the three months to January compared with the previous year, from 1.2 per cent in the October to December period.
That was below January’s 1.9 per cent annual inflation rate, but the Bank of England and the Office for Budget Responsibility expect real wage growth to turn positive in the second half of the year. In the private sector, average earnings were up 1.7 per cent.
Rapid declines in the jobless rate have forced the central bank to abandon its guidance of 7 per cent for considering an interest rate rise. It is now focusing on a wider range of indicators of spare capacity in the economy.
John Philpott, director of the Jobs Economist consultancy, said a combination of job vacancies rising back towards the pre-recession level and falling unemployment had lifted pay growth to within sight of price inflation, especially in the private sector where the real pay squeeze eased markedly around the turn of the year.
“It is now very likely that the average real pay squeeze will end in the coming months, with private sector workers set to enjoy real pay rises for the first time since 2009,” he added.
Esther McVey, employment minister, said: “The rise in employment is being fuelled by businesses and entrepreneurs across the country who are feeling increasingly confident with the improving economy.”
But Rachel Reeves, shadow work and pensions secretary, said long-term youth unemployment had doubled under David Cameron’s government. “It’s clear tens of thousands of young people are not feeling any recovery at all,” she said.
The number of unemployed 16- to 24-year-olds declined 29,000 to 912,000, the lowest level since 2011, or 19.8 per cent of the workforce in that age group.
Underemployment, as measured by those working part time because they cannot get a full-time job, was 1.44m or 18.2 per cent of part timers, down 32,000 on the previous quarter but up 41,000 on a year ago.
Employment climbed 105,000 on the previous quarter at 30.19m, with those working full-time up 165,000. More than 14m women were in work, matching last month’s record 67.2 per cent of the female workforce.
The number of people claiming jobseeker’s allowance was down 34,600 in February at 1.17m, the 16th consecutive monthly decline, after a revised fall on 33,900 in January.
Ian Brinkley, chief economist at The Work Foundation think-tank, said it was “entirely plausible” that the unemployment rate would fall towards 6 per cent by the end of 2015.