Real wages have dropped by 1.2% as regular pay growth fails to keep up with soaring inflation, according to the latest official figures, suggesting the cost of living crisis may also be forcing the unemployed to seek out work at record levels.
The Office for National Statistics (ONS) reported that the fall in regular pay, which excludes bonus payments, intensified when the effects of inflation were included in the three months to March compared to the same period last year.
The 1.2% figure is a nine-year low.
Growth in real total pay remained positive at 1.4%, the report said, due to the effects of bonuses.
However, the squeeze on households is likely to worsen as the Bank of England predicts that inflation will reach 10% this year after hitting a new 30-year-high of 7% in March.
AdvertisementFigures due out tomorrow are expected, by economists, to show the consumer prices index (CPI) measure exceeding 9% in April – largely a consequence of the 54% leap in the energy price cap at the start of the month.
The Office for Budget Responsibility previously warned that households will experience the biggest fall in real incomes since records began in 1956, forecasting a drop of more than 2.2% this year.
More on Cost Of Living Related Topics: Cost of livingInflationThere was evidence in the ONS report that these warnings were having an effect as a record-high movement of people from economic inactivity into employment was noted.
It was also likely that people in jobs were seeking out better pay as total job-to-job moves increased to a record high of 994,000 during the January to March period, the ONS said, adding that the figure was driven by resignations rather than dismissals.
The wider employment figures showed the jobless rate falling to its lowest level since 1974 at 3.7%.
The ONS said that, for the first time since records began, there were fewer unemployed people than job vacancies though vacancies stood at almost 1.3 million – a new high, continuing to reflect the shortage of labour that has been propping up pay awards in the private sector.
JOB NUMBERS UNDERLINE PRESSURES IN ECONOMY Helen-Ann Smith @HelenAnnSmith0There is some good news in the jobs figures today, the lowest unemployment rate since 1974 for instance, but as with so much else across life right now, it’s being tempered by steep inflation and the cost of living crisis.
The fact that regular wages fell by 1.2% in real terms speaks for itself, but inflation is also the fear that takes the shine off strong job numbers.
For the first time since records began there are now more job vacancies in the economy than unemployed people looking for work – great news if you are job hunting – but record vacancies are not necessarily all good.
If businesses are struggling to find staff, it means they’ll have to offer higher pay packets which, in turn, means higher costs for them, higher costs for their customers and potentially more inflationary pushes.
Record levels of job-to-job moves and people moving from economic inactivity into work also speaks to people needing to seek more work amidst the cost of living crisis.
Those running the economy will also have an eye on the longer term – if people simply can’t afford to spend their money, the economy will shrink and that would spell pay cuts, job losses and a whole lot more pain.
The jobs data helped the pound pull back recent losses versus the strong US dollar – popping by a cent and a half to near $1.2670 – while it also rose by a cent against the euro to €1.19.
The ONS data comes as chancellor Rishi Sunak faces increasing pressure to do more to help families struggling with the cost of living.
1:39 Minister: Get ‘better paid job’ for protectionFrances O’Grady, head of the Trades Union Congress, told Sophy Ridge on Sunday that Mr Sunak had “woefully failed” working people and called for a windfall tax to be imposed on the profits of oil and gas companies.
The chancellor said in response to the latest employment data: “The unprecedented support we provided through our Plan for Jobs has led to the jobs market remaining robust despite global challenges, with the unemployment rate near record-lows and the number of payrolled employees at a record high.
“I understand that these are anxious times for people, but it’s reassuring that fewer people are out of work than was previously feared, and we are helping them to keep more of their hard-earned money through tax cuts, changes to Universal Credit and support with household bills worth £22bn this financial year.”
The CBI said it was clear from the data that the labour market was running “red hot”.
But Matthew Percival, the business lobby group’s director of people and skills, added: “Firms are struggling under the weight of persistent labour shortages, rising energy prices and soaring inflation which is adding to the cost of doing business.
“Urgent action is needed to help alleviate the pressure facing businesses and communities across the UK.
“Putting pounds into the pockets of people facing hardship and stimulating business investment are two actions the government can take now that will help us to emerge from this crisis.”