Unemployment in the UK has fallen to a six-year low of 6.5% while the number of people considered economically inactive fell to a figure last seen in 1990, but wage growth has fallen to a record low.
The number of people considered inactive dropped to 21.7% of the working population in Q2 2014, a low only matched by September 1990 and never beaten on records going back to 1971.
Some of the gloss of the 245,000 jobs created over the period was taken off by the rate of wage growth however, which fell from 0.8% in April to just 0.3% in May.
‘Admittedly, this weakness partly reflects the fact that bonuses in April and May 2013 were unusually high, since many workers had delayed taking income until after April’s cut in the additional rate of income tax,’ said Capital Economics’ UK economist Samuel Tombs.
‘But even the headline rate of pay growth excluding bonuses fell from 0.9% to just 0.7% in May – the lowest rate on record. So with few signs that the labour market is a source of inflationary pressure, there remains no pressing need for the MPC to raise interest rates this year.’