But weak productivity and sluggish pay persist, experts warn
Employment rose by 248,000 to 31.05 million in the three months to February, according to the latest Office for National Statistics (ONS) figures, representing the biggest increase over a three-month period since April 2014.
The level of working age people in employment rose to 73.4 per cent, the highest rate since comparable records began in 1971.
The jobless rate fell by 76,000 to 5.6 per cent, which is lower than for September to November 2014 (5.8 per cent) and lower than it was a year earlier, when unemployment was 6.9 per cent.
The number of 16 to 24-year-olds out of work fell by 22,000 compared to the previous quarter, while the number of full-time self-employed workers fell by 27,000, which indicates a continued move toward job security, said Geraint Johnes, director of Lancaster University’s Work Foundation.
“The general buoyancy of the labour market is further evidenced by an increase in vacancies across almost all sectors,” Johnes said.
The real estate sector, and administrative and support services, experienced the greatest job growth, employing in excess of 30,000 more people over the quarter.
However, the forecast on pay remains mixed despite increased employment.
Comparing the three months ending February 2015 with a year earlier, wages increased by 1.7 per cent including bonuses and by 1.8 per cent excluding bonuses.
Ben Brettell, senior economist at Hargreaves Lansdown, said wage growth would remain steady for the next few years.
“The Bank of England has previously said that it wants to see a marked increase in pay before judging that sufficient labour market slack has been eroded for interest rates to rise,” he said.
“If pay growth continues to improve, this removes a key barrier to higher interest rates. In its February Quarterly Inflation Report the BoE raised its wage growth forecast for 2015 to 3.5 per cent.
“This looks optimistic to me, and given the subdued outlook for inflation, I expect rates to remain at 0.5 per cent well into 2016,” he added.
Commenting on the labour market statistics Mark Beatson, chief economist at the CIPD, said while the last set of statistics before the general election were encouraging, the economy would have to raise the productivity of jobs to have a real impact on earnings.
“Now is the right time for businesses to invest in new equipment, processes and in developing the workforce – while interest rates remain low and before skills shortages become widespread. With stable growth, the next government will also need to focus on increasing productivity – which doesn’t just increase living standards but makes it easier to reduce the deficit.
“Businesses and government need to recognise that people drive workplace productivity and that the right training and skills development is key to unlocking business potential. “Simply getting more people into work isn’t a long-term solution for individuals or for economic prosperity. We must focus on whether those people have the skills, training and clear direction to do their jobs well and where they haven’t, take urgent and lasting steps to plug those knowledge gaps,” he added.