Title: UK unemployment hits 48-year low but inflation squeezes pay

May 17, 2022 04:32AM ET

By: AnalysisWatch

Unemployment in Britain fell in the first three months of this year to its lowest level since 1974, but a sharp rise in inflation led to the biggest annual fall in real incomes for most workers since 2013, according to official data released on Tuesday.

The unemployment rate fell from 3.8% to 3.7% - lower than a Reuters poll predicted it would remain - and the number of unemployed was lower than the number of jobs offered for the first time in history.

The Bank of England is watching the strength of the UK labour market closely as it fears that higher-than-normal wage growth is a key channel through which the current energy-led inflation explosion could take root.

Consumer price inflation was 7.0% in March, and official data released on Wednesday will show it rose to 9.1% in April, when a 54% increase in energy tariffs came into effect.

Bankers and construction workers fared particularly well, while public sector workers felt the greatest wage pressure.

Total wages rose 7.0% year-on-year in the first quarter, well above economists' average forecast of 5.4% growth, as companies used bonuses to attract or retain staff. Regular wages rose only slightly more than expected, by 4.2%.

Adjusted for inflation, basic pay was 2.0% lower than a year ago, the biggest drop in the three months to September 2013.

Gov. Andrew Bailey said a drop in living standards was inevitable because of the energy price shock and that an across-the-board increase in wages would disproportionately benefit workers who already have a strong position in the labor market.

The number of people in work increased by 83 000 in the first quarter of the year, but was 444 000 lower than before the COVID-19 pandemic, mainly due to increases in long-term sickness and early retirements.