Pattern of sharp falls in unemployment and subdued wage growth is starting to change - EY ITEM Club comments on labour market figures
Labour marketreturns to more normal conditionswithunemploymentdown and pay growth up.Businesses focus should steadily shift from expanding headcount to boostingproductivity
Martin Beck, senior economic advisor to the EY ITEM Club, comments:
“Today’s figures offer the first real hint that the pattern of sharp falls in unemployment and subdued wage growth that the UK labour market has seen for much of the past few year is starting to change. Both of the main measures of unemployment saw smaller falls in the latest data alongside a clear acceleration in wage growth.
“The ILO measure saw the smallest quarterly decline since mid-2013, while the timelier claimant count measure dropped by 12,600 in April, which was the smallest monthly fall for just over two years. The employment picture was stronger, but not as strong as it had been seen in the recent data.
“While it is true that the annual growth rate was flattered by the comparison with a soft outturn last March, regular pay was up by 0.7% on the quarter in Q1. This suggests that the March data was no flash in the pan.
“We expect the pattern of smaller declines in unemployment and stronger growth in wages to continue over the coming year. The tighter labour market may mean that firms find it harder and more expensive to recruit and so may instead turn their attention towards increasing productivity from their existing workers.”
