New ONS stats show low unemployment – but CIPD warns of ‘pay squeeze’

The Office for National Statistics has today released UK Labour Market statistics for the three months ending February 2017.

The figures show:

  • The unemployment rate was 4.7% in the 3 months to February 2017, down from 5.1% a year earlier; it has not been lower since June to August 1975.
  • Strong demand for labour is translating into a shift from part-time to full-time employment, and an increase in the average hours worked per week by both full time and part-time employees.
  • The number of vacancies increased by 2.1% between the last quarter of 2016 and the first quarter of 2017 to 767,000, the highest level on record.


Estimates from the Labour Force Survey show that, between September to November 2016 and the three months to February 2017, the number of people in work increased, the number of unemployed people fell, and the number of people aged from 16 to 64 not working and not seeking or available to work (economically inactive) also fell.

  • There were 31.84 million people in work, 39,000 more than for September to November 2016 and 312,000 more than for a year earlier.
  • The employment rate (the proportion of people aged from 16 to 64 who were in work) was 74.6%, the joint highest since comparable records began in 1971.



On the face of it, these employment statistics look good.  However, despite all the above, the one statistic which raises concerns for most commentators showed real earnings growth coming virtually to a halt at just 0.1% for the three months to February.


Gerwyn Davies, Labour Market Analyst at the CIPD, the professional body for HR and people development, said these figures need to be viewed in line with year on year living standards, slower earnings growth and rising inflation, warning:

“The latest jobs data suggests that employment and wage growth are running out of steam. Year on year living standards fell in February for the first time since 2014, due to the slower earnings growth and rising inflation we’ve seen during the past six months. It seems highly likely that the annual rate of wage growth will fall in the coming months with inflation predicted to continue to rise during 2017.


“This is perhaps no surprise given the UK’s ongoing productivity crisis, which limits the ability of employers to increase pay. At the same time, low pay growth may also be a sign that employers are seeking to offset the impact of increasing labour costs, such as last week’s Apprenticeship Levy and the latest National Living Wage increase.


“The squeeze on pay may explain why there is greater demand for full-time employment and extra hours in today’s data and points to a labour market where supply is becoming more constrained, rather than a lack of demand. Overall, the data will heighten fears that the living standards of British workers will fall this year, which will curb consumer spending.


“As the Bank of England has pointed out recently, the solution to the problem lies in improving the management practices and processes of laggard employers. And there is little to suggest this situation will improve unless the forthcoming industrial strategy provides greater support for SMEs and employers and government invest more heavily in the skills of the UK’s adult workforce.”



TUC General Secretary Frances O’Grady called on the Prime Minister to act fast in order to prevent a new crisis in living standards.  She said:

“Pay packets are taking a hammering from rising inflation and falling wage growth. We now need urgent action to stop another living standards crisis. Working people will want to know when Theresa May is going to do something to help.


“We need more investment in skills and infrastructure to build strong foundations for better paid jobs. And it’s time to scrap the pay restrictions hitting midwives, teachers and other public servants.”



Young Women’s Trust chief executive Dr Carole Easton OBE called for more action to help young women.  She said:

“Today’s figures show that half a million young women are now out of work and full-time education. Those in work face stagnating wages, while the cost of food and other everyday basics is rising. This is making life even harder for thousands of young women – many of whom are already skipping meals and using food banks in a struggle to make ends meet.


“Young Women’s Trust research shows that more than half of young women are worried about the future, often due to serious financial and housing pressures. Low pay and job insecurity, combined with rising costs, mean many are falling into debt, moving back in with their parents and putting their lives on hold.


“Much more needs to be done to improve young people’s prospects – or even more will be driven to food banks. Young women say they want to work and be financially independent. This means giving them the right skills and support to find jobs, ensuring decent and flexible jobs are available, and paying a living wage that doesn’t discriminate against age. This would benefit businesses and the economy too.”


Doug Monro, co-founder of Adzuna, expressed concerns about access to talent after Brexit.  He said:

“As Spring begins in earnest and with Easter just around the corner, seasonal factors have boosted the jobs market.  The total number of advertised job vacancies we’re seeing at Adzuna is now sitting at 1,126,376, there are still numerous opportunities available to jobseekers and employees alike. The number of people in work is set to rise further as jobseekers and employees are being spoilt for choice.  We are also starting to see signs of a slight increase in monthly wage growth.  It may not be at a rate worth celebrating quite yet but it does show the resilience of the labour market and is a promising indicator of future growth.


“We do need the talent pool, both domestic and international, to keep pace with the labour market, however,  there are still some questions that need to be answered as the country gears up for Brexit.  George Osborne says he wants to win the race to becoming the FinTech centre of the world, but access to people with digital and IT skills will be critical if we are to innovate in the space.  Fortunately, the medium-term future looks bright for these skills with investment in education and T-levels leading decision making in the recent Spring Budget.  But in the short-term, British business will need to take real care to maintain access to overseas talent, too.”


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