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Labour Markets remain strong – Economic review July 2018

The latest of official employment statistics show that the UK labour market remains in a robust state, with the proportion of people in work rising to yet another record high.

Data from the Labour Force Survey showed that the number of people in work rose by 137,000 during the three months to May 2018. As a result, the overall employment rate (the proportion of 16– 64-year-olds in work) rose to 75.7%, the highest figure since comparable records began in 1971. 

The data also showed that the number of people unemployed stood at 1.41 million in the three months to May, 12,000 fewer than in the previous three-month period. This left the unemployment rate at 4.2%, down from 4.5% a year earlier and the joint lowest level since 1975. 

Despite the strong employment data, the modest growth in pay levels that had been evident over the past year appears to have stalled. Average weekly earnings, excluding bonuses, rose by 2.7% in the three months to May compared to the same period a year earlier, down from 2.8% in the previous three-month period. This was the second consecutive monthly decline in this measure of wage growth. 

A moderation in in inflationary  pressures across the year does at least mean that wages are still currently rising at a faster pace than prices. And the recent announcement that the government is lifting its seven- year public-sector pay cap will see around a million public sector workers bene t from bigger pay rises in the coming year. 

In some respects, the recent decline in wage growth may also partly be a statistical anomaly reflecting the unusually large pay awards made a year earlier. However, while this may be the case, the data does still suggest that an era of inflation-busting wage increases is unlikely to be imminent. 

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