Wages are slowly closing the gap with inflation, up 7.2 per cent in the year to April versus inflation of 8.7 per cent. It adds up to a real-terms decrease. It’s the 18th real-terms fall in a row – though the fastest nominal rise on record outside the pandemic. The new minimum wage (up nearly 10 per cent to £10.42 an hour) was a factor. The economy created 250,000 more jobs with the number in employment rising to 33.1 million. This shows signs of the worker shortage crisis softening a bit – the number of people either in work or looking for it rose to 34.4 million, the highest since October 2020. Meanwhile, the number of vacancies softened to 1.05 million – down a tad from 1.08 million but still almost twice as high at any point in the previous decade.
So the factors pulling in a record number of migrant workers in the middle of an era of mass worklessness are just as strong. Figures last month put the number of working age people claiming out of work benefits at 5.3 million. The number out of work on grounds of long-term sickness – the new curse that ministers struggle to understand or respond to – has worsened, rising to 2.6 million.
Meanwhile, pay negotiation rounds saw a 5.6 per cent rise for public sector workers, not far behind the 7.6 per cent for the private sector. The growth in pay was largely driven by an increase in the minimum wage which came into effect on 1 April.
This morning’s figures underline expectations that the Bank of England will keep increasing the base rate until it hits about 5.5 per cent. So variable and new mortgages will become more expensive. One of the unique graphs we maintain in The Spectator's data hub is how those expectations change over time. High inflation bedevils economics worldwide but the UK’s problems seem to be getting harder to remedy – hence the expectation that the Bank will have to jack up rates to a higher level than was envisaged a few months ago.
Added to stubbornly high core inflation (highest for 30 years) this makes another interest rates rise when the bank meets next week almost certain.
The official unemployment count is deceptive given how much hidden unemployment there now is. Around 12 per cent of the working-age population are on out-of-work benefits. But the official count fell slightly to 3.8 per cent. Higher unemployment is, counterintuitively, a good sign because it shows more people are looking for work. In fact, economic inactivity decreased in all age groups.
All together the three months to April saw another 140,000 people moving from economic inactivity (not in work or looking for it) and into the workforce. However, the proportion of those missing from the workforce due to long-term sickness continues to grow. It now stands at a record high of some 2.6 million people.
So, the cooling in the labour market we’ve seen in recent months seems to have stalled. But there are tentative signs it’s a blip rather than a reversing of the trend: data from the Recruitment and Employment Confederation, published earlier this month, suggest a return to a loosening in the jobs market. The number of candidates per job was at the highest level since the pandemic began, they said. Salaries for new employees are also falling at their fastest pace in two years – suggesting employers are having to do less to attract employees. For inflation not to stick, the bankers in Threadneedle Street will be hoping the REC figures prove true.
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