UK unemployment enjoys largest annual fall on record but wage growth remains weak

15th October 2014

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The UK’s unemployment tally dropped by 154,000 to 1.97m in the three months to the end of August according to new numbers from the Office for National Statistics.

The official figures highlighted that the number of unemployed in the country has now tumbled by 538,000 over the past year, representing the largest annual fall in unemployment on record.

However during the three month period, there were almost 31m people in work – 46,000 more than the March to May 2014 total, marking the smallest quarterly increase since the same period last year. Comparing June to August 2014 with a year earlier, there were 736,000 more people in work.

Pay including bonuses for employees over the term was just 0.7% higher than a year earlier while pay excluding bonuses for employees was up 0.9%.

Howard Archer chief UK and European economist IHS Global Insight expects unemployment to continue to trend downward over the coming months but at a gradually slowing rate to stand at 5.8% at the end of 2014 and 5.5% at the end of 2016. He said: “While we expect the economy to continue growing at a healthy clip, we suspect growth moderated to 0.7% quarter-on-quarter in the third quarter from 0.9% quarter-on-quarter in the second quarter. We see growth being centred in a 0.6–0.7% quarter-on-quarter range going forward.

“We also anticipate employment growth will increasingly be limited by improving productivity, as many companies are able to make greater use of the workers they already have.”

Ben Brettell, senior economist at Hargreaves Lansdown added: “More jobs and lower unemployment is clearly good news, but the lack of wage growth remains a thorn in the side of an otherwise fairly robust recovery. A year-on-year increase in earnings of 0.7% is nothing to write home about, and remains considerably below the rate of inflation. Many economists predict that we will see wage growth start to come through over the next twelve months or so, but this has been the forecast for a while and it is yet to materialise. The weakness in wages reflects subdued productivity, which has been hamstrung by a lack of capital investment.”

7 thoughts on “UK unemployment enjoys largest annual fall on record but wage growth remains weak”

  1. David Lilley says:

    “Pay including bonuses for employees over the term was just 0.7% higher than a year earlier while pay excluding bonuses for employees was up 0.9%”.

    From this statement we must conclude that bonuses were negative.
    The above rubbish was repeated by Robert Peston on his BBC blog.
    Did the ONS issue a press statement that was repeated word for word by Mindfulmoney and the BBC without question of the obvious errors? It should have been 0.9% including bonuses and 0.7% excluding bonuses.

    Does any reader really think that 240,000 came off the register and found self-employment? If they really did then you could expect 80% to fail within a year reducing the 240,000 to 56,000.
    Did any of them have a business plan or an idea or did they just take the £3,000 offer to start their own business?
    When they start to get hungry and the £3,000 has gone what will they do?

    They will not get a job in fast food, hospitality or market gardening.
    The principal of JSA has never been applied; “you are a job seeker you must take this job”.
    We have more “quest workers” where we have the highest numbers of JSAs and ICBs. It is still the case.
    Immigration would stop if we applied the JSA principal. There wouldn’t be any jobs for the migrants.
    We don’t need to change the EU rules on the free movement of labour. We only need to apply the JSA principal.

    1. Noo 2 Economics says:

      Hi David and once more into the fray –

      “Did the ONS issue a press statement that was repeated word for word by Mindfulmoney and the BBC without question of the obvious errors? It should have been 0.9% including bonuses and 0.7% excluding bonuses.”

      Unfortunately, I saw the same ONS line used by Shaun the other day here: http://notayesmanseconomics.wordpress.com/2014/10/15/the-uk-has-falling-real-wages-and-oil-prices-but-a-rising-price-of-football/

      and he too failed to question what seems to be a glaring inconsistency, but I couldn’t be bothered to challenge as I don’t have much spare time these days and don’t feel I can trust any ONS figures any way after all the fiddling, excuse me, “improving” of the measures.

      May be every one’s fed up with all the mis-information and now realise even if they question a particular aspect there is now so much interference with the stats they will still be no further ahead.

      I now view all official stats as an amusing interlude before I return to Simon Ward’s scarily accurate analysis and my own anecdotal evidence which is usually uncannily accurate.

      On the Self employment side I think once the(not really) self employed’s Enterprise Allowance runs out there are ways to game the system, thereby continuing in receipt of Working Tax Credits or in the case of new claimants Universal Credits whilst still being considered by the DWP to be “self-employed”.

      In this way we may be treated to the sight of “falling unemployment” simultaneously accompanied by a burgeoning social security bill. As Forbin would say – get the popcorn by your side and enjoy the show.

      1. David Lilley says:

        Noo,

        We agree on something.

        May I make a correction to my comment above
        and add some more reflection.

        In the past twelve months alone 280,000
        (not 240,000) new self-employed workers entered the jobs market. If they were all Richard Bramston’s this number would fall to 56,000 within a year or two as 80% of new start-ups fail. But these 280,000 were cajoled into self-employment and therefore the failure rate will be much higher.

        I think even our hero, Simon Ward, may have
        misread the rapid fall in unemployment when he posted one week after Mark Carney’s forward guidance in August 2013 that unemployment would hit the 7% target in some three months rather than some 18 months. Indeed it hit 7% in
        September 2013 when taking the monthly reading.

        In his March 2013 Budget George Osborne stated that we had put on 1.8m new private sector jobs since 2010, 80% were British and most were full-time. I was very happy but of course 1.8m becomes 1.2m net new jobs when you take account of the 600,000 lost in the public sector.

        I am now convinced that George is including the Enterprise Allowance self-employed as new private sector jobs and also as full-time.

        We have been here before with Gordon Brown.
        He claimed that the number in work was the highest on record and unemployment was falling. His trick was to cajole JSAs to become ICBs. At its peak there were 3.5m ICBs which is like 12% of the working population. It was years before we noticed the distortion. The Sunday Times sent a young healthy reporter into every Job Center in every city and major town to claim JSA and they all came out on ICB. I remember one comment from the Job Center staff “you have just said that you have fallen out with your girlfriend, therefore you are depressed”.

        Depressed has become the new back-ache, the new English disease.

        The Daily Mail blew Gordon Brown’s claims apart by reveling that 90% of all the new jobs created since 2004 went to guest workers.

        We have been trying to reduce the ICB count since about 2007 but we still haven’t got below 3m (10% of the working
        population). Every study still finds that 93% could work.

        1. Noo 2 Economics says:

          “….80% were British” and “The Daily Mail blew Gordon Brown’s claims apart by reveling that 90% of
          all the new jobs created since 2004 went to guest workers”.

          This sounds like racism. As an American and proud of it, I have an intense dislike of any kind of racism, jobs are jobs, it doesn’t matter who they go to.

          If the English are wingeing that they can’t get a job (which I suspect is because they refuse to do the low skill, low pay jobs the “foreigners” are doing) then I suggest they look at reasons why “foreigners” are getting the jobs by reference to the “foreigners” work ethic, level of dedication and performance

          1. David Lilley says:

            Noo,
            You may note that I always use the term “guest worker” rather than immigrant. Better educated, industrious, on-time, a smile on their face, the list goes on.
            That the Brits don’t take jobs in fast-food, hospitlity, market gardening etc is a point I have made above.

          2. Noo 2 Economics says:

            I’m not letting this go David as just earlier today I was a made a victim of racism – “Immigration would stop if we applied the JSA principal. There wouldn’t be any jobs for the migrants.” – your own words, you clearly see immigrants as “something bad”. I think without us immigrants who are imo the main wealth creators here, England wouldn’t know what had hit it.

            You may be interested to know that I am awaiting the outcome of the 2018 EU membership referendum to decide whether to go, as the UK stands no chance outside of the EU. If the vote is to leave the EU then I shall be re-locating stateside and starting over,as once the UK leaves the EU the UK economy will start to crash about 2 years after it leaves.

            Then the racists (the same ones who voted to leave the EU) will look for someone to blame and that will of course be “the foreigner”, from there I expect to see a version of Nazi Germany and the Jews in the UK (did you know that already foreign widows of UK expats living abroad have their husband’s state pension cancelled on his death by the UK Government – doesn’t happen in America because it’s institutionalised racism!) but I will already have left along with most of my kind and we will of course be taking our wealth, work ethic and skills with us. But then I guess you’ll be celebrating that until the ensuing and ongoing depression bites you.

          3. David Lilley says:

            Noo,

            Please note my email is davidmichael.lilley@googlemail.com.

            We could continue this conversation privately.

            I am sorry that you have suffered racialism.
            You should be like Socrates when taking the Hemlock “you creeps can take my
            body but not my soul”. They are the losers and the more hurt you feel about it
            the more success you give them.

            I’m a philosopher. I don’t do personal, emotive,
            sophistry, history, party politics, and existentialism. I just do brutal
            epistemology; truth, logic, scientific method. You know you are a philosopher
            when you trash the ideas of greed, evil, altruism, egotism, goddo, racial mismatch,
            nationalism and religion when you are 11.

            I have already gone into a no-go area,
            personal. You are making me bleed. We all came from Africa 45,000 years ago,
            there are no national characteristics except for the slovenly, I knew about
            Nelson Mandela 25 years before the rest of us by reading all the Anti-Apatite pamphlets,
            I know what the pencil test is.

            The subject here is not the goodness or badness
            of our guest workers (I am with Kant, man is only rational i.e. we would all do
            the same in the same circumstances). The subject is “has the Enterprise Allowance
            skewed the employment and unemployment statistics to such an extent that the
            BoE, OBR, Simon Ward and others have been wrong-footed in their interpretations
            of what is happening leading to puzzlement. “Why is productivity so low, why isn’t
            wages growing in line with GDP and why is the deficit growing when all the signals
            suggest it should be reducing?”

            There is no room for puzzles. If they are
            puzzled they should get out of the kitchen. Yes it is brutal. There are only
            problems, tentative solutions, testing, error elimination and ultimately solutions
            that have good correspondence with the facts.

            I tell a lie. You start off thinking only about
            fairness. You move to the king of philosophical enquiry, epistemology, when you
            realize that it is the best weapon. The problem with guest workers is not them
            but the fact that it lets so many Brits off working for a living and that is
            not fair on their neighbors or indeed the guest worker who effectively props up
            two countries with no thanks from either.

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