An expert has warned of an ‘economic storm’ ahead as UK employment dropped to a near-50 year low, at the same time that wages also suffered a massive fall.
The Office for National Statistics (ONS)’s latest jobs market data showed that, when adjusted for inflation, earnings dropped by the highest margin in nine years.
The unemployment rate fell to 3.7% in the first three months of the year, which is the lowest since 1974. Between January and March there were 1.257million people out of work.
The ONS also reported that growth in employees' average total pay (including bonuses) was 7.0%, and growth in regular pay (excluding bonuses) was 4.2% in January to March 2022.
However, when adjusted for inflation, regular pay fell by 1.2%. The ONS said strong bonus payments in certain sectors have kept recent real total pay growth positive.
"Continued strong bonuses in some sectors such as construction and especially finance mean that total pay is continuing to grow faster than prices on average, but underlying regular earnings are now falling sharply in real terms,” the ONS said.
Is an ‘economic storm’ on the way?
Reacting to the latest statistics, Anthony Painter, Director of Policy at CMI, commented: "We have a push me-pull you economy. On one hand soaring inflation, slowing growth and a cost of living squeeze. Yet alongside this, unemployment is at historical lows and vacancies are still rising though at a slower rate. Something has to give and the betting, unfortunately, has to be that the impact of inflation and falling real pay for millions will be a huge drag on economic growth. Any drag on business activity will likely soften hiring, whilst household incomes are set for the largest contraction since records began in 1964 - an economic storm is visible.
“The recent energy price cap hike is set to fuel the April cost of living rise announcement due tomorrow. Although cost of living pressures may have encouraged some workers back into the workforce - the tightness of the labour market makes it a very difficult balancing act for both employers as there is still high demand for skilled workers.
“If employers aren’t able to go the extra mile to support workers' pay and conditions they may find they lose valuable staff which also increases costs in the short-term. We saw a record number of job moves in the first quarter of the year. On top all of this, the Government has yet to go far enough to support struggling households and that in turn appears to be placing pressure on businesses given recent growth figures. The picture is complex but despite good news on jobs severe warning signals are visible."