The City is ruling out a rise in interest rates this year amid evidence that a fresh fall in unemployment to its lowest levels since the height of the financial crisis has failed to reignite pay growth.
Data from the Office for National Statistics (ONS) showed that joblessness on the internationally agreed yardstick was 468,000 lower in the three months to July than in the same quarter of 2013 – the biggest annual decline since the Lawson boom was raging in 1988.
George Osborne said the 146,000 fall in joblessness marked “another step on the road to full employment” but Labour and the Trades Union Congress (TUC) seized on news that earnings were failing to keep pace with prices.
Shadow employment minister Stephen Timms said: “Pay excluding bonuses today is the lowest on record. Under this government wages after inflation have already fallen by more than £1,600 a year since 2010 and by next year working people will have seen the biggest fall in wages of any parliament since 1874.”
Frances O’Grady, TUC general secretary, said: “Last week the governor of the Bank of England said the fall in real wages is the worst since the 1920s and today’s figures show it getting worse. Pay increases are less than half the rate of inflation, so living standards keep on falling.”
ONS figures showed unemployment on the “labour force survey” measure fell to 2.02m in the three months ending in July.
The rate fell more sharply than expected, with the drop from 6.4% to 6.2% taking it to levels not seen for almost six years. The alternative “claimant count” measure, which looks at the number of people out of work and claiming jobseeker’s allowance, fell by 37,200 to 966,500 in August, the first time it has been below a million since September 2008, when the global financial crisis began with the bankruptcy of Lehman Brothers.
Between May and June this year there were 774,000 more people in work than in the same three months of 2013, but the ONS said that in the three months ending in July, employment rose by just 74,000, the smallest increase for more than a year. It said that of the 74,000 jobs created, 68,000 were part-time.