Wage growth at highest level since 2008 crisis and jobless rate falls

22 January 2019, 09:23 | Updated: 22 January 2019, 12:26

Total pay awards hit their highest level in more than 10 years in the three months to November, according to official figures showing record employment in the run up to Brexit.

As the economy continues to stutter in growth terms amid continued uncertainty over the UK's departure from the EU, the Office for National Statistics (ONS) reported average weekly earnings growth of 3.4% over the period compared to a year earlier.

That was its best rate since July 2008 - before the financial crisis took hold.

The figures also pointed to record employment of 32.5 million - rising by 141,000.

The jobless rate fell from 4.1% to 4% - its lowest level since 1975 - despite an 8,000 rise in the number of people without a job over the three months.

It took the jobless total to 1.37 million and marked the third successive increase despite job vacancies being at their joint highest level since 2001, the ONS reported.

The wage data will be particularly welcome for retailers - struggling amid shoppers' jitters about Brexit - as it signals household spending power is continuing to grow and pent-up demand could soon be released.

The rate of inflation was last measured at 2.1% in December.

The ONS said that wage growth, even when the effects of bonuses were stripped out, still came in at 3.3% in the three months to November.

:: Inflation falls to lowest level in almost two years

It all meant, the number crunchers said, that total average weekly earnings, when adjusted for inflation, increased by 1.2% compared with a year earlier.

Head of the labour market at the ONS, David Freeman, said: "The number of people working grew again, with the share of the population in work now the highest on record.

"Meanwhile, the share of the workforce looking for work and unable to find it remains at its lowest for over 40 years, helped by a record number of job vacancies.

"Wage growth continues to outpace inflation, which fell back slightly in the latest month."

While the government cheered the figures, the TUC general secretary Frances O'Grady said: "This modest rise in wage growth will do little to help workers still feeling the effects of the longest pay squeeze in 200 years."

The figures were announced as business groups slam the government's handling of the Brexit deadlock.

Suren Thiru, head of economics at the British Chambers of Commerce, said: "The marked increase in employment is further evidence that the jobs market remains a major positive for the UK economy.

"Although some firms report that Brexit uncertainty and recruitment difficulties are weighing on hiring intentions, the high degree of flexibility of the labour market continues to limit the impact of a sluggish economy on UK jobs growth."

The figures were greeted positively by financial markets as the Brexit-hit pound strengthened against both the dollar and the euro - climbing back above $1.29 versus the greenback to its highest level since November.

Commenting on the figures, Simon Harvey, market analyst at Monex Europe, said: "Further positivity creeps back into sterling's price action as the UK economy continues to tick along despite the Brexit debacle taking centre stage.

He added: "Once uncertainty over the future of the UK's relationship with the EU clears, the Bank of England will likely be called into action and resume their (interest rates) hiking cycle.

"Currently, the implied probability of a rate hike by the Bank of England is a coin flip before the year is out, but this represents the ambiguity over Brexit as opposed to the state of the economy.

"Should Brexit uncertainty begin to alleviate by a deal taking shape or a substantial extension in Article 50, sterling will start to claw back ground against the US dollar as the UK economy continues to surprise to the upside."