The UK employment rate has risen to its highest level in over 40 years but wage growth has slowed, according to the latest figures from the Office for National Statistics.
The employment rate was 74 per cent in the three months to November, the highest rate since 1971, with the number of people out of work falling by 99,000 to 1.68 million.
The unemployment rate hit 5.1 per cent during the same period, down from 5.8 per cent on the 2014 figure.
However, annual earnings growth in the three months to November slowed to 2 per cent, down from 2.4 per cent in the three months to October and 3 per cent in the three months to September.
Aegon UK investment director Nick Dixon says: “As the labour market continues to tighten, and unemployment remains at seven-year lows, calls for the MPC to tighten policy would usually intensify
“But the triple-whammy of sluggish wage growth, subdued inflation, and bearish global markets appears to be having a knock on effect on the UK’s growth momentum.
“With global markets in turmoil and a freefall in commodity prices bringing deflationary pressures the world over, policy makers are left with little choice but to play a waiting game that could stretch into 2017.”
IHS Global Insight chief economist for UK and Europe Howard Archer argues UK earnings growth is “still decent” and expects the unemployment rate to fall further in 2016.
He says: “While the recent weakening in earnings growth has diluted the improvement in consumers’ purchasing power, it is still relatively decent. Annual average growth of 2 per cent in the three months to November was still 1.9 percentage points above consumer price inflation of 0.1 per cent in November. Consumer price inflation was still only 0.2 per cent in December.
“Meanwhile, we expect the number of jobless to trend gradually down over the coming months, taking the unemployment rate down to 4.8 per cent by the end of 2016.”