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Unemployment rate hits 42-year low – but wage growth falls behind inflation

The UK’s unemployment rate fell to the lowest point since 1975 in the first quarter of 2017, but wage growth fell behind inflation for the first time since 2014.

Figures from the Office for National Statistics show unemployment fell by 53,000 compared with October to December and 152,000 year-on-year to 1.54m. The unemployment rate was 4.6%, down from 5.1% a year earlier.

The number of people in work rose by 122,000 compared with Q4 and was 381,000 higher than Q1 2016 at 31.95m. The employment rate was 74.8%, the highest since comparable records began in 1971.

However, average weekly earnings excluding bonuses fell by 0.2% in real terms compared with a year earlier.

Earnings had grown by 2.1% in the three months to March, but inflation increased by 2.3% in the year to March.

Commenting on the figures, Alepesh Paleja, principal economist at the Confederation of British Industry, said: “Rising employment continues to reinforce the importance of the UK’s flexible labour market.

“However, weakening productivity and slower pay growth, coupled with rising inflation, will continue to squeeze real household earnings.”

Dr Heather Rolfe, associate research at the National Institute of Economic & Social Research, said the fall in the unemployment rate and record high employment rate suggests employers are facing “increasing difficulty in sourcing the labour they need”.

“Of the current 777,000 vacancies in the UK jobs market, 85% are in services, including health and social work. These vacancies have implications for the quality of services,” she added.

“The statistics show that EU workers are continuing to meet employers’ needs yet, with the fall in the value of sterling and uncertainty around future rights to work in the UK, this may not continue.

“The Government would be wise to guarantee the future right to remain for existing EU citizens in the UK and also to ensure that employers can continue to address labour shortages through migration, where their needs cannot be met locally.”

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