Jessica Fino 12 Jul 2017 05:15pm

UK unemployment falls to lowest level in over 40 years

Unemployment in the UK dropped to 4.5% from March to May, the lowest level since 1975, according to the Office for National Statistics (ONS)

It found there were 1.49m unemployed people in the UK, 64,000 fewer than three months earlier and 152,000 fewer than last year.

The employment rate was 74.9% between March and May, the highest since 1971. There were 32.01m people in work, 175,000 more than in the previous quarter.

However, wage growth slowed during the three months to May. Average weekly earnings in real terms (adjusted for price inflation) fell by 0.7% including bonuses, and by 0.5% excluding bonuses.

Matt Hughes, ONS senior statistician, said, “The general picture is little changed on last month, with the overall employment rate and that for women both at record highs, the inactivity rate at a joint record low and the unemployment rate falling to its lowest since early summer 1975.

“Despite the strong jobs picture, however, there has been another real-terms fall in total earnings, with the growth in weekly wages low and inflation still rising.”

Anna Leach, CBI head of economic intelligence, said, “These figures underline the strength of the UK’s flexible labour market, which was recognised in yesterday’s Taylor Review. But declining real pay and productivity remain concerning, reinforcing the imperative that any changes following the review support the economy’s ability to create great jobs.

“Making real progress on productivity growth requires a modern industrial strategy, with real change on the ground on skills, infrastructure and innovation.”

John Hawksworth, chief economist at PwC, said, “The great UK jobs creating machine has kicked into gear again, with employment growth accelerating in recent months after slower growth in late 2016. The employment rate is now within touching distance of 75% for the first time ever, while the unemployment rate fell further to 4.5%.

But he warned that real earnings growth remains deep in negative territory and appears unlikely to change anytime soon.

He added, “This will dampen consumer spending power, though the continued strength of the jobs market should prevent the recent slowdown in the economy turning into a recession.”

The ONS also said on Wednesday that the number of vacancies remained close to a record high, with 686,000 job vacancies in the services sectors for March to May 2017, accounting for 88.6% of all vacancies.

The sectors with the largest number of job vacancies were wholesaling, retailing and repair of motor vehicles (142,000) and human health and social work (120,000).

Frances O’Grady, the TUC’s general secretary said, “Three months of falling pay is three months too many. The clock is ticking whilst workers wait for the government to act.

“Ministers must set out a plan to get real wages rising across the public and the private sectors. They should start by scrapping the unfair pay restrictions on nurses, midwives and other public sector workers. And the minimum wage must be raised to £10 as quickly as possible.

“Tackling insecurity at work is important for improving pay too. When people don’t feel secure in their job, they are less likely to push for the pay rise they deserve. The government should start by accepting the Taylor Review recommendation to give agency workers equal pay. And they should go further and ban zero-hours contracts.”

Mike Cherry, national chairman at the Federation of Small Businesses (FSB), said, “With operating costs now at their highest in four years, small business employees are absorbing inflationary pressure by paying themselves less.

"Many will also be responding with further price increases, leaving all concerned with weakened discretionary spending power. Our consumer-facing members say they’re really starting to feel the impacts of decreasing demand.

”The new ‘dependent contractor’ status unveiled in the Taylor Review, if done right, should bring new wage policies for those unfairly treated in the gig economy, whilst also protecting the genuinely self–employed. But ministers must not be allowed to widen the net on a whim without robust parliamentary oversight.”