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Friday, 15 May 2015

UK economy "an incredible job-creating machine"?

31 million and up

John Hawksworth, Chief Economist at PwC, observed that the UK economy has become "an incredible job-creating machine".

And at face value he seems to be right.

The latest figures from the Office for National Statistics revealed that total employment in the Old Dart has been catapulted to a record high of 31.1 million.

The economy added another 202,000 jobs in the January to March quarter according to the ONS (Blighty loves to report its labour force data in an unusual 3mth/3nmth format for reasons that have never been entirely clear to me).

It seems that all those immigrants weren't coming all over to draw benefits after all!

Snarky comments aside, the most recent six months of figures do strongly suggest that employment of foreign-born residents is faring considerably better than that of UK-born equivalents, although it is rarely wise to draw strong conclusions from two quarters of data.

Unemployment to a 7 year low

The unemployment rate fell to just 5.5 per cent down from 5.7 per cent in the December quarter and 6.8 per cent one year ago.

This is the lowest level for the UK unemployment rate since the middle of 2008.

Meanwhile, the number of people recorded as out of work fell by a further 35,000 over the quarter.

The total number of unemployed has now declined dramatically from above 2.7 million in November 2011 to 1.83 million as at Q1 2015.

More impressively still, the employment rate has surged to its highest level since record began in 1971 at 73.5 per cent.

Wages and inflation

Average pay excluding bonuses was up by 2.2 per cent on the comparative prior quarter.

Hardly electric wages growth, it must be said, but then with the Consumer Price Index tipping in at zero (0.0 per cent year-on-year) real regular pay is now in its best shape in four years.

Until relatively recently inflation was powering along at levels of up to 5 per cent, in part by design to inflate away previously heated levels of household debt.

But over the most recent months inflation has fallen to zero, driven down by lower oil prices in recent months.

Growth expectations fade

The first rate hike still seems as far away as it ever did.

The latest Bank of England forecasts revised down expected growth in the economy for 2015 to 2.5 per cent and for 2016 to 2.6 per cent.

This combined with low productivity and indicators of under-employment add weight to the theory that many of the jobs created by the "incredible machine" are comprised of of lower paying roles (or, worse, are zero hour contracts).

Much work still to do on the deficit, but at least the government has five more years in which to tackle it, an outcome which seemed very much to be hanging in the balance - at least according to the pre-election polls.