Experts warn record rates hide underlying labour market issues
Employment in the UK is at its highest level since 2005 reaching a rate of 73.1 per cent, according to figures from the Office for National Statistics (ONS).
The number of people in work reached 30.64 million in the three months to May.
However, self-employment has been the main driver behind broader jobs growth, experts said. The number of people running their own business rose by 404,000 this year, hitting a total of 4.58 million in May, the highest increase since ONS records began in 1992.
Unemployment continued to fall, reaching 6.5 per cent in March to May 2014, and the proportion of economically inactive people – those out of work but not seeking or available to work – fell to 21.7 per cent, mirroring the lowest ever rate recorded in September 1990.
Encouraging figures in the labour market were not replicated in the rate of earnings.
Pay, including bonuses, for the period between March and May, were just 0.3 per cent higher than a year earlier. Excluding bonuses, this rate increased by 0.7 per cent.
Experts suggest record employment rates are disguising underlying issues in the economy.
“With the number of people in work continuing to climb, most people would be forgiven for thinking that the economy can only move in one direction. The natural assumption is, after all, that more jobs equals more confidence, equals more growth,” said Bernard Brown, partner and head of business services at KPMG.
“However, the falling unemployment figures mask a number of underlying factors. Many of the jobs being created are among the self-employed – workers who can effectively price themselves into a job. Furthermore a high proportion of part time workers are seeking full time work, suggesting spare capacity,” he said.
Mark Beatson, chief economist at the CIPD, said productivity remained a major issue for the UK labour market and could be influencing the slow wage growth.
“The latest wage growth figures could be an unusually low one-off but, even if they are, they remind us that there are no signs of pay pressures building up in the official figures,” he said.
“This should not come as a surprise when labour productivity growth is flat and when the government’s welfare reforms, the availability of EU migrants and the latent supply from the under-employed mean we have strong growth in labour supply. Therefore, it is very difficult to see where the pick-up in wages growth will come from,” he added.
TUC general secretary Frances O’Grady welcomed the falling unemployment rate, but questioned the quality of the jobs being created.
"If all the recovery can deliver is low-paid, low-productivity jobs - many of which don't offer enough hours to get by - then it will pass most working people by and Britain's long-term economic prospects will be seriously diminished," she said.