Unemployment rates in the UK have fallen to 5.5 per cent, their lowest levels since 2008.
The number of people without a job in the UK declined to a seven-year low, according to official figures from the Office for National Statistics (ONS). Furthermore, the data has highlighted that wages are also growing.
Despite coming after the election race, the positive report will bolster the government’s confidence that its long-term economic plan is continuing to work. Meanwhile, it could also give the Bank of England (BOE) ammunition to raise interest rates earlier than current forecasts.
The ONS’s labour report showed that the unemployment level declined to 1.83 million in the January to March period, a fall of 35,000 from the previous quarter and the lowest level since 2008. In the same period, the unemployment rate fell to its lowest since mid-2008 at 5.5 per cent.
Second-lowest unemployment rate in EU
Britain now has the second-lowest unemployment rate in the European Union, with only Germany seeing a lower rate. In addition, employment in the UK continues to hit record highs.
There were 31.1 million people in work in the January to March period of this year and the employment rate edged higher to 73.5 per cent, its highest since records began in 1971.
On the other side of the coin, average weekly earnings excluding bonuses (regular pay) rose to 2.2 per cent in the first quarter when compared with the same period a year earlier. Including bonuses, average pay grew by 1.9 per cent over the same period.
The earnings figures show that the regular rate of pay has surpassed the annual inflation rate for seven months running, and has now climbed to its highest rate for almost four years.
"The British economy remains an incredible job creating machine,” said PwC chief economist, John Hawksworth.
“With consumer price inflation stuck at zero, workers are experiencing solid, real pay rises for the first time since the recession. This should help to support the domestic economic recovery at a time when international economic prospects remain very mixed,” he added.
UK growth forecasts downgraded
However, the labour statistics come alongside a subdued quarterly inflation report from the BOE, where the UK’s growth forecasts were downgraded.
The 0.7 per cent increase in employment levels over the first quarter of 2015 is at odds with preliminary estimates for GDP of 0.3 per cent in the same period, which implies a decline in levels of productivity and is “not what you would expect at this stage in the economic cycle”, according to Mr Hawksworth.
“The possibility remains that these GDP growth estimates will be revised up in future years to better match the strength of the labour market data," he added.
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