Average earnings have slipped further behind the rate of inflation, despite unemployment falling to its lowest level for more than 12 years.
According to official figures from the Office for National Statistics (ONS), average pay increased by 2.2% in the year to September, down from 2.3% in August and well below Consumer Price Index inflation which currently stands at 3.0%.
Adjusted for inflation, average weekly earnings are now 0.4% lower compared with a year ago.
Total unemployment in the three months to September fell by 59,000 to 1.4m, despite the number of people in work falling by 14,000 to just over 32m – the biggest fall since June 2015.
This apparent contradiction is explained by the number of people classed as economically inactive – such as those who are on long-term sick leave , caring for a relative or not looking for work – which rose by 117,000 to 8.8m, the biggest jump in seven years.
The narrower count of those eligible to claim unemployment-related benefit rose on a seasonally adjusted basis by 1,100 to 806.100 last month while on an unadjusted basis the count fell by 6,185 to 789,285.
At local level, where all claimant figures are unadjusted, there was a mixed picture in Suffolk and north Essex.
In Suffolk, the end of the main summer holiday season contributed a rise in the counts in the county’s main tourism hotspots
Waveney saw the biggest increase, with the count rising by 55 to 2,220 and the jobless rate by 0.1 of a percentage point to 3.4%, while in Suffolk Coastal an increase in the count of 20 to 450 left the rate unchanged at 0.6%.
In contrast, rates fell by 0.1 in Babergh, where the count fell by 15 to 420 (a rate of 0.8%), Forest Heath, down 25 to 295 (0.7%), and Mid Suffolk, down 30 to 440 (also 0.7%), and rates remained unchanged in Ipswich, where the count fell by 10 to 1,710 (2.0%), and St Edmundsbury, where the count was also unchanged at 780 (1.2%).
In north and mid Essex rates remained unchanged across the board although the claimant count grew in most areas, notably Colchester where the rate remained steady at 1.1% despite an increase in the count of 45 to 1,370.
Smaller increases also left rates unchanged in Braintree, up 30 to 960 (a rate of 1.0%), Chelmsford, up 10 to 1,165 (1.1%), Tendring, up five to 1,995 (2.6%), and Uttlesford, up 20 to 255 (0.5), while in Maldon, the count was also unchanged at 345 (0.9%).
ONS statistician Matt Hughes said: “After two years of almost uninterrupted growth, employment has declined slightly. However, it remains higher than it was this time last year, and as always we would caution people against reading too much into one quarter’s data.”
Employment minister Damian Hinds said: “The strength of the economy is driving an increase in full-time, permanent jobs and a near-record number of people are now in work thanks to the Government’s welfare reforms.
“When unemployment fell to 5% early last year, many people thought it couldn’t get much lower, and yet it now stands at 4.3%.
“Everyone should be given the opportunity to find work and enjoy the stability of a regular pay packet. We’ve cut income tax for 30 million people since 2010, meaning people keep more of their money each month.”
However, TUC general secretary Frances O’Grady said: “This is the seventh month in a row that prices have risen faster than wages, but ministers are still standing on the sidelines.
“Running the economy is not a spectator sport - the Chancellor must have a game plan to give Britain a pay rise in next week’s Budget.
“Public sector workers are long overdue a decent pay rise. And we urgently need investment in high-skilled jobs to boost productivity. With in-work poverty soaring, the minimum wage must be put up to £10 as soon as possible.”
Other figures from the ONS yesterday showed that productivity increased by 0.9% in the latest three months following two quarters of falling output.
ONS head of productivity Philip Wales said: “While the latest quarterly growth rate is the strongest for six years, over the last 12 months productivity has grown by just 0.6%. The medium-term picture continues to be one of productivity growing but at a much slower rate than seen before the financial crisis.”
Matthew Percival, head of employment at the CBI, said: “Employment fell slightly in Q3, accompanied by a large rise in inactivity, though caution is required when considering one data point, with the unemployment rate remaining at a 42-year low.
“While the rise in productivity is encouraging, businesses will be looking for the Chancellor to cement progress in next week’s Budget and maintain flexibility in the labour market, which remains a mainstay of the UK economy.”
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