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Wage increases catching up with inflation?

Andrew Neil | 10:38 UK time, Wednesday, 18 May 2011

A government short of good economic news is pouncing on the latest unemployment figures.

The latest stats from the Office for National Statistics show that unemployment fell by 36,000 on the three months to March to 2.46 million, cutting the overall unemployment rate a tad to 7.7 per cent.

For 16-24- year-olds not in education (ie excluding students looking for part-time work) unemployment fell 40,000 on the quarter to 646,000.

Of course it's not all good news. The number of people claiming Jobseekers Allowance (the claimant count), for example, increased by 12,400 between March and April 2011 to reach 1.47 million.

So let's take a look at the stats in more detail:

The number of people in employment aged 16 and over increased by 118,000 on the quarter and by 416,000 on the year to reach 29.24 million. That will give ministers some comfort that private sector job creation can outweigh public sector job losses.

But the employment total is still 332,000 lower than the pre-recession peak of 29.57 million for the three months to May 2008, which shows the UK economy is still a long way from recovering from the economic consequences of the financial meltdown.

Full-time employment increased by 94,000 to 21.30 million, which continues of the trend of the private sector switching from creating largely new part-time to more new full-time jobs.

The number of people unemployed for up to 12 months fell by 56,000 to reach 1.61 million. But the number of people unemployed for over 12 months increased by 20,000 to reach 850,000, the highest figure since January 1997.

Why did the claimant count rise while the wider measure of unemployment (the labour force survey) falls? I suspect that's something to do with the government's welfare reforms

The economy is growing by enough to reduce the overall unemployment total by a bit but more people who were on other forms of welfare are moving on to unemployment benefit as the rules for disability and lone-parents' benefits are tightened.

There are also a few glimmers that wages are beginning to chase rising prices. Earnings (including bonuses) grew by 2.3 per cent for the three months to March 2011, up from 2.1 per cent for the three months to February. A small change to be sure but an upward tick and perhaps the start of a trend. Also, that global rise includes the public sector, where there's a pay freeze.

Total pay in the finance and business services sector increased from 4.6 per cent to 6.2 per cent, which is quite a rise and one that will worry the Bank of England.

Private sector pay has been in the doldrums for a while but these pay stats suggest companies now have the money to give pay rises closer to the inflation rate.

If that is happening, the Bank's oft-repeated claim that current inflation is just a blip will turn out to be wrong.

This is Andrew's last blog in this format - future entries will appear with a new look at a different web address: more details when the new site is live.


  • Comment number 1.

    As more and more disability claimants migrate to Job Seekers Allowance so will the unemployment count rise. This is exactly the reverse of what happened in the 1980s and 1990s when the government migrated people from unemployment benefit onto Incapacity Benefit. They did this because unemployment remained stubbornly high and they wanted to avoid the embarrassing conclusion that their policies were not working. The chickens are coming home to roost.

  • Comment number 2.

    All this talk about youth unemployment - it was already at a record high of 952,000 BEFORE Labour left office.

  • Comment number 3.

    "Total pay in the finance and business services sector increased from 4.6 per cent to 6.2 per cent, which is quite a rise...."

    I work in the "finance and business sector" and the firm I work for has frozen pay for admin + support staff for the past 4 years .... of course the pay freeze does not apply to the "money earners" at the top, who have continued to receive pay increases during the past 4 years.

    No pay rise since 2007 and most of us now want to tear our hair out or jump off the top floor of the b*****y building. :-(

    And we're supposed to feel "grateful" for the fact that we still have jobs -- pah! But that doesn't pay for the yearly increase in travel costs, council tax, utility bills and basic food etc !!!!!!!!

  • Comment number 4.

    Another major cause of inflation is the high cost of fuel. The government could cut the tax if they wanted to, but naturally prefer to keep fleecing the motorist instead.

    As for unemployment, does the coalition really feel that extending parental leave will help the economy compete with overseas producers? We are not just importing more goods, but exporting jobs.

    The coalition was formed, so we were told, in the 'national interest', specifically do deal with the deficit. The coalition has absolutely no mandate for anything else. Yet Clegg has once again set his sights on major constitutional 'reform', this time by introducing plans to let elected members of the Upper House sit for 15 years.

    When is this coalition going to do something to help the economy instead of this self-centred navel-gazing?

    Very sorry to hear this is your last blog in this format! The new format is absolute rubbish! Apart from the arbitrary limit on the number of characters, the new-style page does not allow you to see more than a few comments at once.

    It's typical of the BBC to try to appeal to the Twitter generation by dumbing down! Over the last few months, readers have been regularly requested to answer surveys about their opinions of the blogs. I cannot believe these changes are as a result of survey answers!

  • Comment number 5.

    Wage increases are not catching up with inflation from where I'm sitting.

    If you are unfortunate enough to be working for an employer that thinks the minimum wage is all they are obliged to pay so that's all they are going to pay (of which there are many such employers), you are falling behind inflation...

  • Comment number 6.

    One problem is that many are being early retirement. Accordingly their income is such that they are not entitled to JSA after six months. The government, including labour, have effectively brought in means testing.

  • Comment number 7.

    'This is Andrew's last blog in this format - future entries will appear with a new look at a different web address: more details when the new site is live.'

    Can't wait, even though it may not appear until Xmas and close on Boxing Day after 3 comments.

    Which, looking at the trending thus far, is possibly all that will be attempted if feedback so far is to be anything other than taken on board, lessons learned and then ignored:


    (old style, for now)

  • Comment number 8.

    Good morning each & Andrew. [27 characters including spaces and punctuation?...and counting]
    This may be an improvement IF it confines the journalists to the 'pith'. Because we can certainly do with more pith and less padding.

    "...we hope - also on devices which will have been invented by the time another 10 years rolls around." (thanks for the link Junk-k)

    Should one of these hoped-for advances remove non-stories that too would help. Which brings me to our old pal Ken Clark, the star of the most recent non-story. The calls for his resignation can be described in English with a word of four characters, where we Scots use five; sh***. [638 characters, so says my Open Office]

  • Comment number 9.

    'If that is happening, the Bank's oft-repeated claim that current inflation is just a blip will turn out to be wrong.' - Andrew Neil

    Indeed so. I'm worried about inflation; I think it might take off at some point in the near future.

    Any case, last 'AN' blog in the good old format so my last chance ... gratefully accepted ... to do bold and italics ... and for good measure bold italics!

    That felt great, it really did. Thanks guys and au revoir.
  • Comment number 10.


    Sad to see the old home up for development -no more epic posts, no more formatting heaven and definitely no more handcart to hell.

    See you on the other side with its funny arrows and 240 characters.

  • Comment number 11.

    Yes, the funny arrows. I'm perversely flattered that somebody is taking the trouble to mark down all of my comments, whatever they say. What's the opposite of a secret admirer?

  • Comment number 12.


    A stalker?

    Hopefully the novelty of the arrows will soon wear off.

    Strange facility to give to rabid politicos - some of the guys that have gone off in a huff are probably still looking in.

    Still not convinced the new format is a change for the better from our perspective.

  • Comment number 13.

    Coats @ 12
    No, I don't think the new format is for our benefit. I guess the old NR blog was like a pub, with a few regulars in the corner playing dominoes and drinking bitter from their own tankards which were kept on a hook behind the bar. Then one day it reopened as a gastro pub. Complete refurb: tankards, dominoes, armchairs all in the skip. Wants to attract a different crowd now. And when you try to order a bag of pork scratchings, you're told it's pistachios, olives or nothing.


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