Unemployment falls to 5%

Unemployment fell slightly to 5% between February and April, according to the latest figures from the Office for National Statistics.

Earnings, excluding bonuses, rose by 2.3% compared with last year. Pay growth in April was 2.5%, which the ONS said is probably linked to the introduction of the National Living Wage in April. Earnings including bonuses were 2% higher from 2015.

The figures show public sector employment rose slightly, but this is thought to be mainly down to the NHS. Most of the rise in employment is down to the private sector. The number of people working in local government fell to an all-time low.

Employment in London rose more than elsewhere with the South West experiencing the biggest job losses. For men the region with the highest average hours worked was Northern Ireland, at 38.5 hours, and for women it was London, at 28.5 hours. The largest difference in average hours worked between men and women was in Northern Ireland, where men worked on average 11.1 more hours a week than women. The largest change compared with last year was seen for women in the South East, where the average hours worked decreased by 3.2%; a decrease from 26.9 hours to 26.0 hours per week.

Gerwyn Davies, Labour Market Adviser at the CIPD, the professional body for HR and people development, says: “The pick-up in wage growth we’re seeing today might seem to suggest that the tight labour market is finally feeding through to wages.  However, this boost to earnings may be short-lived unless employers are able to increase their productivity to meet the additional cost of the National Living Wage.

“If efforts to improve productivity fail to materialise, the obvious response from many employers will be to cut back on overall pay awards or wider employee benefits. If this doesn’t happen, we can expect to see lower pay growth in some of organisations and job losses in others.

“In addition, many commentators will cite the uncertainty about the upcoming EU Referendum vote as the key reason for the slowdown in hiring. However, this would ignore the wider concern about a slowing economy and employers’ increasing concerns over the cost implications of the National Living Wage, pension auto-enrolment and the impending Apprenticeship Levy.

“Overall, the data makes the case for improved productivity an even more pressing concern. If businesses are putting employment decisions on hold, they should use this time to take stock of the skills, technology and working practices needed to move their businesses forward in the long-term, regardless of what the EU decision is. They can do this by improving the quality of leadership and management, up-skilling existing staff and redesigning jobs to enable people to work smarter rather than harder.”

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