Britain labor figures, earnings growth support continue recovery

Robust labor data showed that the British unemployment fell 63,000 to 2.33 million in the three months to January and wages rising closer to inflation, economists noted Wednesday. The rate of unemployment is 7.2 percent, down from 7.4 percent over the previous rolling three-month period. Earnings growth figures, released at the same time as the jobs figures, still remain below inflation with average weekly earnings growth improving to 1.8 percent in January from 1.3 percent in December and 0.7 percent in November. With Consumer Price Inflation (CPI) falling to a 50-month low of 1.9 percent in January, the gap between inflation and headline earnings growth has narrowed from a peak gap around 2.0 percentage point last August/September, but for British workers this is still the sixth consecutive year of real-term wage shrinkage. "Given pay awards are creeping higher, Income Data Services has reported that newly agreed wage deals are running at 2.4 percent, we are hopeful that real wages will soon turn positive," said James Knightley, British economist with ING Bank. Knightley said this would be a big boost for household incomes after nearly 6 years of wages failing to keep pace with the cost of living. "It clearly boosts purchasing power and with employment continuing to grow, aggregate household incomes are going to strengthen further. The fact that wage rates are starting to pick up is also a sign that the spare capacity in the labor market is being reduced," said Knightley. However, the unemployment figures also showed that the economic recovery was not being felt by all sectors of the job market. Compared with the previous three months, there were 211,000 more self-employed workers during the three months to January. Most of the jobs lost were in the public sector, down 159,000 between Q3 and Q4 in 2013, reflecting continued government budget cuts. "While the drop in unemployment by 63,000 is to be welcomed, this can't disguise the thrust of government policy which is towards a low-waged economy where insecure employment is rampant," said Len McCluskey, General Secretary of Unite, one of Britain's largest unions. McCluskey said the young and the long-term jobless needed help, and criticized the regional nature of the economic recovery. "Too much of what good economic news there has been is skewed towards London and the South East -- for example, in the North East the unemployment rate is 9.5 percent, when the national average is 7.2 percent," said McCluskey. Chief economist David Kern of business group representative body British Chambers of Commerce (BCC) was also critical of high youth unemployment. "These figures show that while the UK labor market remains strong and flexible, the pace of improvement is slowing. Youth unemployment edged down slightly, but with the rate at 19.8 percent, it is still nearly three times the rate of unemployment as a whole," he said. "While earnings growth increased slightly it remains below inflation. For pay to increase further, we need to see similar increases in productivity in order to sustain it," Kern added