Employment reached a new record high, but economists still aren’t happy

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Employment jumped to a new record high in the first quarter of the year as wage growth held steady, though economists warned that Britain's jobs recovery is still losing steam.

The total number of people with a job jumped to 31.6m – an employment rate of 74.2 per cent – in figures released by the Office for National Statistics (ONS) this morning. That is both the highest rate and absolute number since records began in 1971.

The unemployment rate remained unchanged at 5.1 per cent, though the official claimant count dropped by 2,000 against expectations of a 4,000 uptick.


Figures out last month showed a surprise jump in the number of people out of work and raised fears about a labour market slowdown following an impressive rate of job creation in 2014 and 2015.

The pace of earnings growth also held steady in the numbers out today, which should help to settle nerves, with average wages increasing at a rate of two per cent – up from 1.9 per cent last month.

While "there is much to be celebrated … there are other less positive areas that are likely to linger for longer," said Michael Martins of the Institute of Directors, pointing to weaker pay growth in the private sector, where the increase in average earnings dipped from 2.5 per cent to 2.3 per cent.

Paul Hollingsworth, UK economist at Capital Economics, also suggested that the figures might only look good because expectations were that this could be another patchy month.

"Although there were some bright spots in today’s UK labour market figures, on the whole they offered a further indication that the economic slowdown has sapped the jobs recovery of its recent vigour. Employment growth is set to remain muted in the near term," he said.

"Today's data confirms that the great UK job creating machine slowed somewhat in the first quarter of this year," added PwC's chief economist John Hawksworth.

The pound slipped back against the dollar as the figures were released, dropping by 0.2 per cent to $1.4416 in the minutes after the announcement.

"This is a softish labour market report overall, but not as bad as feared," said IHS Global's Howard Archer. "The labour market is essentially treading water amid increased business caution and uncertainty ahead of June's referendum."

Commentators also pointed to the effect that the introduction of the national living wage (NLW) could be having on wage growth. The NLW – the £7.20 minimum wage for over 25s – came into force at the beginning of April, a period not covered by these figures, though it is likely at least some companies had already made adjustments.

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"With the labour market relatively tight, recruitment difficulties in some sectors and the NLW taking effect in April … it is likely that earnings growth will gradually pick up over the coming months," Archer added.