UK's unemployment hits 5-year low, pay growth matches inflation

UK's unemployment hits 5-year low, pay growth matches inflation

LONDON - Britain's unemployment rate fell more than expected and pay growth caught up with inflation for the first time in nearly four years.

Sterling jumped and government debt prices fell after official statistics showed the unemployment rate sank to a five-year low of 6.9 per cent in the three months to February, down from 7.2 per cent in the three months to January.

That was below the 7 per cent level originally set by the Bank of England for considering an increase in interest rates. The Bank has since given fresh guidance about when it might start to tighten monetary conditions.

Economists in a Reuters poll had expected the unemployment rate to slow only to 7.1 per cent.

The Office for National Statistics said total pay growth picked up to 1.7 per cent in the three months to February. Consumer prices in the month of February also rose 1.7 per cent.

It was the first time since April 2010 that pay growth had not lagged consumer prices, the ONS said. Economists in the Reuters poll had expected pay to grow by 1.8 per cent.

In the month of February alone, total pay growth was 1.9 per cent, the ONS said.

And in another sign wages are starting to recover some of their value, in March the consumer price index slowed to 1.6 per cent, data released by ONS on Tuesday showed.

An end to the erosion of wages by inflation should help Britain's Conservative-led government, which has come under fire from the opposition Labour party for what it calls a cost of living crisis.

"These remain difficult times for families facing pressures on their budgets, and much work needs still to be done to build a resilient economy," chancellor of the exchequer George Osborne said in a statement. "But today's news supports the argument we have made all along that the only way to see rising living standards is to grow the economy."

Samuel Tombs, an economist with Capital Economics, said signs investment was picking up and a further easing of inflation meant real pay should begin to rise at a stronger pace soon, underpinning the broader economic recovery.

Your daily good stuff - AsiaOne stories delivered straight to your inbox
By signing up, you agree to our Privacy policy and Terms and Conditions.