Unemployment rate drops to lowest in 48 years, but pay growth lags behind

Unemployment in Britain has fallen to the lowest rate in 48 years, according to figures from the Office for National Statistics.

In the three months to July, the rate of unemployment fell to 3.6%, down from 3.8% in the three months to June.

However, the figures will provide little encouragement for Britons as the cost-of-living crisis sets in and a recession looms.

Though unemployment has dropped, pay has not risen to meet the higher costs of living.

Inflation currently stands at 10.1% and is forecast to rise further to 13%, while prices in supermarkets have risen by 5.1% - the highest levels since the financial crash in 2008.

The report notes that employers are not rising pay to meet the higher costs of living. When taking the rise in prices into account, the value of regular pay fell by 2.8%, the ONS said.

Average pay growth for the public sector rose by 2%, while the private sector grew by 6%, the largest gap between public and private sector.

Although job vacancies remain high, the number fell by 34,000 to 1,266,000 between June and August, the largest quarterly fall in two years, signalling that Britain could be heading for a job slump.

James Reed, the boss of Reed recruitment told the BBC’s Today Programme that the job boom which began six months after the coronavirus pandemic is likely “coming to an end now”

"There are still very large numbers of vacancies and people are still advertising a lot of jobs, and that’s why we’ve seen unemployment continue to go down.

"The question is, what happens next? Will there be a jobs slump? That’s a concern clearly but our data at the moment doesn’t suggest that, because we’ve still got a large number of vacancies and a lot of employers are still struggling to recruit."

Chris Maslin, director at Tunbridge Wells-based employee ownership specialists, Go Eo said that there are lots of vacancies, but higher wages are needed to meet the higher costs of living.

“For now at least, unemployment is low so people have lots of choices where to work. With the cost of living so high, they also want higher wages.

“However, economic forecasts are grim so employers are reluctant to offer high salaries. The result is that most employees are choosing to stick with the status quo.

“Employees are concluding ‘better the devil you know’ ahead of what some expect to be a difficult and protracted recession. Worker stability may be the best way for both sides to weather the storm.”