Employment at Record Levels but Growth Has Stalled

The UK employment rate remains at a record high but has plateaued in the last five months, the Resolution Foundation said today in response to the latest ONS labour market statistics. The headline employment rate stayed at 74.1 per cent in the three months to February 2016, its third month running at this record high level. Below the headlines, employment has been flat for the last five months – signalling a plateau in the remarkable employment growth of the past four years. The Foundation says that fresh impetus will be needed to spark significant further increases in employment. It calls for a new approach to employment focused on getting the economic inactivity rate, which has fallen to at a record low of 21.7 per cent, down even further.

Real pay growth remained at two per cent, slight below its pre-crisis trend. The Foundation warns that with inflation starting to rise again, nominal wage growth will need to increase in order to maintain the UK’s pay recovery.

Research published earlier this week by the Resolution Foundation showed that moving jobs was a key spur for stronger pay growth. Between 2007 and 2014 pay growth among 18-29 year olds who switched jobs was 2.7 times higher than those who stayed put (11.8 per cent vs 4.4 per cent in cash terms).

The Foundation is concerned by the subdued level of job switching today, particularly among young people, which risks stunting their careers and earnings potential.

 Laura Gardiner, Senior Policy Analyst at  the Resolution Foundation, said:

“Employment remains at a record high but jobs growth appears to have stalled in recent months. A new approach is needed to bring fresh impetus and get employment rising again. “Real pay growth also remains flat at around two per cent. Having lost so much ground during the recent squeeze, it’s a concern we’re not seeing any sign of catch-up during this period of unprecedented low inflation.

 “One of the key routes to stronger pay growth is moving jobs, particularly for young people at the start of their careers. The current lack of job mobility – which may reflect a lack of confidence among both young people and employers – risks holding back their careers and earning potential.”

Meanwhile in Wales

“The drop in unemployment is welcome, but it’s not just about the number but the quality of jobs in Wales. We know that Wales’ low-wage economy is a longstanding problem that we need to tackle. The average wage in Wales is significantly lower than the UK average. Plaid Cymru wants to introduce a large-scale investment project, to invest in rail, road and green infrastructure, and our plans to establish a new WDA for the 21st century will sell Wales to the world. We want to sell our ideas and products to the world, and bring investment to Wales. We need fresh thinking and a new direction for the economy, and Plaid Cymru will deliver that change.”