Welcome jobs boost but pay growth looks set to remain subdued

Employment growth continues to impress but a slowdown in productivity suggests that pay growth is set to remain subdued, the Resolution Foundation said today (Wednesday) in response to the latest ONS labour market statistics.

The employment rate reached another record high of 74.1 per cent, driven by increases in both full-time employee jobs and self-employment.

Real regular pay growth remains at 1.9 per cent – below pre-crash trends (and despite historically low inflation). The Foundation forecast that real pay growth is set to stay flat, rising by 1.8-1.9 per cent next month.

The Foundation warns that the slowdown in productivity growth, which fell back to 0.9 per cent in the last quarter of 2014 (down from 1.3 per cent in Q3), means that real pay growth is likely to remain subdued in the coming months, particularly as inflation starts to rise again.

The Foundation notes that 10 of the UK’s 12 regions and nations have now returned to their pre-crash employment levels, with the North West having recorded the strongest jobs growth (followed by London and the South East). The South East and Northern Ireland still have ‘jobs gaps’ to make up.

Laura Gardiner, Senior Policy Analyst at the Resolution Foundation, said:

“The jobs market continues to impress, with welcome jobs growth seen across all areas of the labour market.

“But the outlook for pay is more troubling, with the UK’s nascent productivity recovery actually falling back towards the end of last year.

“With inflation finally starting to rise again, far stronger productivity growth will be needed if we’re to have any hope of recovering some of the ground lost during the UK’s seven-year pay squeeze.”

Notes to Editors