UK employment and unemployment have both fallen, while economic inactivity has risen, according to the latest labour market data from the Office for National Statistics (ONS), released today. The data show that employees in employment have seen the biggest fall in nearly two years, while the economically inactive group - those who are neither working nor looking for a job - rose, partially due to a jump in student numbers.
In response to today’s UK labour market figures, John Hawksworth, chief economist at PwC, said:
"Today's labour market data broke the pattern of recent years in seeing a decline in both total employment and average hours worked between the second and third quarters of 2017.
“But this was due to rising economic inactivity, not rising unemployment, which fell by a further 59,000 between the second and third quarters. Vacancies also remained close to historical highs, suggesting that the labour market remains tight despite the dip in jobs growth.
“The fall in employment and hours worked in the third quarter of the year, led to a marked rise in productivity per hour of 0.9%, following two quarters of productivity decline. But these data can be erratic from quarter to quarter and it is far too early to conclude that the long-term problems with weak productivity have started to be resolved. A similar upward blip in productivity occurred in autumn 2016 but proved short-lived, so we will need a lot more data before we can conclude that the tide has turned on UK productivity growth.
“However, this short term rise in productivity has not translated into real wage growth, which remains negative. Earnings growth is still stuck at 2.2% compared to the latest consumer price inflation rate of 3%, so there is no early end in sight to the squeeze on real household spending power.
“Analysis published by the ONS today shows that the level of real pay remains 3.2% below its pre-crisis peak in early 2008 excluding bonuses, and around 6% lower including bonuses. Based on our forward projections, it seems unlikely that average real earnings levels will return to pre-crisis peaks until well into the 2020s."