We want our members to be kept up to date with the latest analysis of the unemployment situation. Below is a range of views from economists that will hopefully give a more comprehensive understanding of how unemployment, pay growth and job creation impact on you and your family.
Unemployment figures: what the economists say (Guardian article)
Industry experts react to figures that show unemployment fell by 97,000 to 1.86 million in the three months to December last year
The latest unemployment figures reflect an improvement in the labour market Photograph: Bloomberg via Getty Images
Phillip Inman, economics correspondent
Wednesday 18 February 2015 13.53 GMT Last modified on Wednesday 18 February 2015 14.30 GMT
Howard Archer, chief UK economist at IHS Global Insight
The labour market is still seeing healthy improvement, with the latest figures indicating some strengthening in job creation following moderation in the latter months of 2014. In particular, employment rose by 103,000 in the three months to December, having been up by 37,000 in the three months to November (which had been the smallest three monthly rise since March-May 2013).
In addition, the number of claimant-count unemployed fell at an increased rate of 38,600 in January, which was the largest drop since last June. Unemployment on the ILO measure fell by a very decent 97,000 in the three months to December, taking the unemployment rate down to 5.7%.
We expect unemployment to continue to trend downward through 2015, at a pretty steady rate. Specifically, we project the unemployment rate to fall to 5.2% by end-2015, and 4.9% by end-2016. Expected ongoing healthy economic growth is seen supporting demand for labour, but rising productivity is expected to limit the fall in unemployment. It is also evident that in some sectors, companies are now finding it harder to get the skilled and experienced workers that they need.
Matthew Whittaker, chief economist at the Resolution Foundation
Tumbling inflation and the return of modest pay growth in the private sector at the end of last year has provided much-needed relief to workers, following six years of falling wages.
Further falls in inflation provide a propitious backdrop for a long overdue bounce back in pay. But the strength of pay rises might be set to vary by sector once again. Finance is recovering strongly after a disappointing 2013, while the public sector pay is barely able to keep up with even historically low inflation.
There remains considerable uncertainty over how pay will grow through 2015. Far higher pay settlements and a greater concentration of new jobs in middle and higher-paid occupations will be needed to turn the current recovery into a boom, along the lines forecast by the Bank.
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Jeremy Cook, chief economist at currency broker World First
Wages are growing at their best level in 3½ years and inflation is at the lowest level on record; consumers are in a very good position and so are the prospects for the UK economy. Real wage increases, currently at the best levels in nearly seven years, represent a silver bullet for the wider UK recovery.
Real wage increases come from optimistic employers happy with business conditions, they allow consumers to re-balance spending figures having taken on credit in leaner times and promote growth in generalised output with a central bank more comfortable to normalise monetary policy. Indeed, the Bank of England told us in their latest minutes that they expect to see CPI rising “fairly sharply” after the fall in oil drops out of the basket.
All in all this is a corking jobs report; higher wages, lower unemployment mixed with lower inflation released yesterday is nothing but good news.
Ben Brettell, senior economist, Hargreaves Lansdown
Unemployment fell once more to a six-year low of 5.7% in the three months to December, ONS figures released today showed. 30.9m people were in work, an increase of 608,000 from a year earlier.
Meaningful real wage growth is starting to emerge too. Average weekly earnings increased by 2.1% including bonuses and by 1.7% excluding bonuses in the three months to December compared with a year earlier. Combined with inflation at 0.3% and falling, this means the squeeze on household budgets is beginning to ease significantly.
The Bank of England [in minutes published on Wednesday] noted that the pickup in pay growth has been faster than it had anticipated. It previously said that it wants to see a marked increase in pay before judging that sufficient labour market slack has been eroded for interest rates to rise.
If pay growth continues to improve, this removes a key barrier to higher interest rates. However, given that inflation is expected to fall below zero in the coming months, and stay close to zero for the rest of the year, there is no pressure on the Bank to raise interest rates in the short term.
Indeed, Mark Carney indicated last week that the Bank would even consider cutting rates if deflation looked like it was becoming entrenched. With inflation likely to pick up once the effect of the drop in oil prices falls out of the year-on-year calculation, a cut in rates looks most unlikely, but I don’t see them rising until mid-2016 at the earliest.
Martin Beck, senior economic advisor to the EY ITEM Club
December’s rise was not enough to prevent real pay in 2014 as a whole dropping by 0.3%. This left real pay in 2014 down more than 8% on its 2007 level, the largest seven-year fall in inflation-adjusted earnings since records began in the middle of the nineteenth century.
Looking forward, falling unemployment may put further upward pressure on pay rises. But the capacity of firms to accommodate those rises from rising productivity continues to be lacking, with the UK’s dismal productivity performance showing little sign of improving.
Total hours worked grew by 0.8% in Q4, exceeding growth in GDP of 0.5% and implying that output per hour fell in the quarter.