The UK economy is benefitting from a continued trend of falling unemployment as well growth in wages. Unemployment has dropped to 1.86 million, while wage growth is ahead of inflation by the biggest margin in nearly five years.
In the three months to December 2014, the number of unemployed in the UK fell by 97,000. According to the Office for National Statistics, this places the unemployment rate at 5.7% of the country’s current working population.
Long-term unemployment – those who have been out of work for a year or more – fell by 210,000. The UK is now home to approximately 638,000 people who are classed as long-term unemployed.
The total employment rate for those aged 16-64 in the three months to December reached 73.2% This is a record high, tied with the three month period from December 2004-February 2005 when employment rates reached exactly the same level. Together, these periods jointly represent the highest level of employment since records first began to be kept in 1971. Overall this means that, during the final three months of last year, the UK population included 30.9 million people in work. Compared to the same time a year earlier, this is an increase of 608,000.
Unemployment for the 16-24 age group, however, remained unchanged compared to the previous quarter. This figure remained at its existing level of 16.2%.
While overall employment has risen, self-employment has fallen over this three month period. Overall, the quarter saw the number of people working for themselves in the UK fall by 19,000. There are now around 4.4 million self-employed individuals.
The same three months saw average earnings up by 2.1% compared to the same period a year before when bonuses are included. If the figure is recalculated without taking bonuses into account, wages for the quarter were up by 1.7% year-on-year. In the month of December alone, wages were up 2.4% compared to the same time in 2013. This is the furthest ahead of inflation that average wages have been since March 2010.
Inflation, meanwhile, stood at 0.5% in December. The most recent data, released this week, shows that January saw inflation fall to a mere 0.3%. This is the lowest level of inflation seen since records began.
The pound has risen in value against other major currencies, and in particular has reached a seven-year high against the Euro. The strength of the labour market, with rising employment and wages, is believed to be a significant factor contributing to the strengthening of the pound.