Strong employment recovery continues as vacancies climb to record high

But falling unemployment is yet to feed into stronger pay growth

The strong employment recovery has continued into 2015 and real earnings are picking up. Despite this, nominal wages remain flat and would need to more than double by the end of the year to meet the 3½ per cent level projected by the Bank of England, the Resolution Foundation said today (Wednesday) in response to the latest labour market statistics.

Regular pay growth across the economy fell slightly to 1.6 per cent in the three months to January (from 1.7 per cent in December), though falling inflation meant that real wages continued to grow. The finance sector experienced the strongest regular pay growth at 2.1 per cent, while public sector pay grew by just 0.7 per cent.

The employment rate among 16-64 year olds increased to 73.3 – beating the previous peak in 2005 of 73.2 per cent. However, the 16+ employment rate is still the equivalent of 330,000 jobs short of its pre-downturn level. With vacancies standing at a record high of 735,000, the Resolution Foundation said it expected the strong employment recovery to continue in the coming months.

Matthew Whittaker, Chief Economist at the Resolution Foundation, said:

“The employment recovery of last year looks set to build in 2015. Very low inflation should generate further momentum in real wage growth too.

“However, the level of nominal pay growth remains surprisingly muted given the strength of the employment picture. We’ll need to see a big step up if we’re to see a long overdue bounce in wages this year, as some have predicted.”employ