This article is more than 1 year old

This article is more than 1 year old

Wage growth has slowed in the UK to put a squeeze on living standards despite the unemployment rate falling to its lowest level for more than 40 years.

The fall in pay growth to 3.3% on the year in the three months to March, from 3.5% in the three months to February, also came as the buoyant labour market recorded a rise in employment to a new high of 32.7 million.

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The Office for National Statistics said the growing number of vacancies, together with the falling level of unemployment, indicated the jobs market was continuing to tighten. The jobless rate fell from 3.9% to a record 3.8%, the lowest since 1974.

However, analysts said the shadow of Brexit uncertainty, which has sent business investment plummeting, was likely to have discouraged firms from hiring and improving wage rates.

Illustrating the lack of investment, labour productivity, which measures the labour force’s output per hour, fell for the third consecutive quarter.

It slumped 0.2% in the first quarter following a decrease by 0.1% in the last quarter of 2018 and 0.2% in the third quarter of 2018. Productivity growth averaged 2% a year before the 2008 financial crash.

Mike Jakeman, a senior economist at PwC, said: “It is possible to see the shadow of Brexit in some of these figures. March was the month when Brexit anxiety was at its most acute, and it might have been the case that firms were more reticent to offer higher wages and advertise new positions in these weeks.”

After several months of rising wage growth, the recent slowdown could further strain household budgets amid Bank of England forecasts of an increase in shop prices this year.

Inflation has steadied in recent months at 1.8%, but is expected to rise above the central bank’s target of 2%. The ONS put the inflation-adjusted rate of wage growth at 1.3%

Brexit-related uncertainty was blamed for a rise in self-employment, which returned to its record high of 15.1% of all jobs, last seen in 2017. Self-employment accounted for just over 90% of the 99,000 quarterly rise in total employment.

John Philpott, director of the Jobs Economist consultancy, said: “It’s unclear if the near stalling in employee employment at the start of the year reflects any impact of Brexit-related uncertainty on job hires, with firms instead turning to self-employed contractors, but either way the apparent weakness of hiring combined with slightly slower pay growth suggests that the falling jobless rate should not be seen as a reason for an early interest rate rise.”



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Vacancies have fallen back in recent months from a record high, but they remain elevated at 850,000 across all sectors.

The sectors with vacancies greater than 60,000 were:

Wholesale and retail trade, repair of motor vehicles and motor cycles (139,000).

Human health and social work activities (134,000).

Accommodation and food ( 92,000).

Professional, scientific and technical activities (80,000).

Manufacturing (61,000).

The employment minister, Alok Sharma, said: “Maintaining our record employment rate with unemployment falling again to just 3.8%, its lowest rate since 1974, once again shows the success of our balanced approach to managing the economy.

“Rising wages and booming higher-skilled employment means better prospects for thousands of families, and with youth unemployment halving since 2010, we are creating opportunities for all generations.”

The ONS data also showed the number of EU workers in the UK rose by an annual 58,000 after three consecutive falls.

The number of non-EU workers in the country grew more strongly, up by 124,000 compared with the same period of 2018.