UK’s Office of National Statistics data has shown a rise in spending power of British workers to two year high after the biggest growth in real pay since September 2016. The average weekly earnings rose by over 3.3% in the 2018 excluding bonuses while falling to 2.3% in November 2018. If bonuses are included the average pay increased by over 3.4% with an increase of 1.1% in real terms.
The Office of National Statistics the number of people with employment in the country increased by over 141,000 to a record level of 32.54 million. The employment rate which measures the percentage of working age people with employment rose to 75.8% from 75.3% in the previous year. The numbers indicate the highest growth in employment since the advent of comparative estimates in 1971.
Britain’s economy showed evidence of a booming job market as it witnessed shift of 100,000 previously unemployed people to economic activity. Although unemployment rate reduced to historical lows of 4% since the 1975 rate, Economists point out that the latest rise in employment is credited to self-employment which accounted for 93,000 or two-thirds of the job gains. This indicates that though number of employed people rose in official numbers, the number of job vacancies in the market have broadly remained unchanged.
This is evident from the fact that as Brexit date nears, businesses in the country are increasingly holding off on investments in fear of post-Brexit uncertainty. The companies are preferring to hire self-employed people rather than payrolled employees. Increase in payments to employees was witnessed as employers raised staff hiring’s in the period of skills shortage, but already employed people found difficulty in securing any inflation-busting rise in real terms.
The year may have proved good for the UK economy but Jeremy Thomson- Cook, Chief economist at WorldFirst said that had it not been the looming uncertainty over no-deal Brexit, The Bank of England would have taken the wage and employment rise as an indication of inflationary pressure prompting it to raise interest rates. He added that as wage increases the inflation rates may eventually rise but for now low investor confidence in the economy will offset the pressure. He predicted that in the event of a smooth exit of the Britain from the EU with a deal, Bank of England will consider raising interest rates.