Rises in employment gather pace, but earnings growth struggles

Experian welcomes the positive labour market figures, which should provide support to incomes despite easing wage growth.

The key points comparing the three months to November 2015 with the three months to August 2015 are:
• Total employment rose by 267,000.
• The unemployment rate fell to 5.1%
• Comparing the three months to November 2015 with a year earlier, pay including bonuses increased by 2.0% and by 1.9% excluding bonuses

This latest data was slightly stronger than expected. Economic growth has slowed perceptibly in recent months with downward revisions to third quarter growth indicating GDP expansion at a modest 0.4%. But the labour market upswing remains very strong with a sizeable gain in employment and a further fall in unemployment. This will only stoke fears around the UK’s productivity performance – an improvement on this front is a prerequisite for sustainable wage growth.

A further slowdown in earnings growth with total earnings up only 2% was the weakest outcome since February 2015. But with wage increases at this pace well above the extremely benign rate of inflation, strong gains in real disposable income still provide a solid foundation for consumer spending growth of 2.8% in 2016, supporting overall expansion at 2.2%.