Unemployment drops with more full-time jobs

Unemployment fell to its lowest level in more than 40 years in June as thousands of higher-quality jobs were created. More workers are moving into full-time jobs instead of part-time work and the number on zerohours contracts dropped to its lowest level since 2009, the ONS said.

UNEMPLOYMENT dropped to its lowest level in more than 40 years in June as the rebounding economy created tens of thousands of higherquality jobs.

More workers are moving into fulltime jobs instead of part-time work, the Office for National Statistics said.

The number working zero-hours contracts fell by more than 100,000 to 780,000 while the proportion of parttime workers who want full-time jobs is down to 11.7pc, its lowest level since 2009.

As a result, unemployment fell to 4pc in the three months to June, down from 4.2pc previously. This is the lowest level since the start of 1975.

The number of unemployed Britons fell by 65,000 on the quarter to 1.36m while the number in work increased by 42,000 to 32.4m. Youth unemployment fell to a new record low of 11.3pc.

Jobs growth looks set to continue. The number of job vacancies rose to a new record high of 829,000 in July.

However, the improvement in living standards has ground to a halt. Wage growth slowed to 2.4pc in June, with earnings rising exactly as much as prices over the past year. As a result the rise in living standards enjoyed since the spring has now stopped.

This reflects the ongoing productivity crisis. Output per hour worked rose by 0.4pc in the quarter, recovering from the 0.4pc fall in the opening three months of the year. Over 2018 so far, the crucial economic indicator has flatlined, extending its decade-long struggle. On an annual basis productivity is up 1.5pc, giving glimmers of hope that the trend may be slowly improving.

“On the one hand, we find ourselves in the welcome situation in which unemployment continues to fall, propelled by moves into employment by younger workers,” said Stephen Clarke of the Resolution Foundation. “However, while the unemployment rate continues to fall to near-historic lows, inactivity has ticked up and pay growth appears stubbornly stuck at levels far below those before the crisis.

“The result is a labour market that appears fundamentally different to that which existed before the crisis; high employment coupled with weak pay growth could be the new normal.”

Construction workers’ pay is rising the fastest, at 5.3pc on the year. By contrast, workers in finance and business services are at the bottom of the heap with pay increases at 1.5pc.

Weak pay growth is a problem for the Bank of England. It raised interest rates this month on the basis that rising wages are a sign the jobs market is operating at full capacity. Without higher interest rates they fear inflationary pressures will start to build, forcing the Bank to miss its 2pc inflation target.

“Employment is at a record high, there is very limited spare capacity, real wages are picking up and external price pressures are declining,” said Mark Carney, the Bank’s Governor, this month. “With domestically generated inflation building and the prospect of excess demand emerging, a modest tightening of monetary policy is now appropriate.”

But unemployment has kept on falling without accelerating wages.

“The slowing of total pay growth makes the Bank of England’s recent increase in interest rates look premature,” said Rachel Lund at the British Retail Consortium.

By nationality, the number of EU workers in the UK fell by 13,000 on the quarter and by 86,000 on the year to 2.35m. This is the biggest fall on record but still leaves the UK with more EU workers than it had before the Brexit referendum.

It comes at a time of falling unemployment on the Continent, as joblessness in the EU as a whole is down to below 7pc, from a peak of 11pc in 2013.