Office for National Statistics data show unemployment has fallen to a five-year low of 6.9 per cent in the three months to February while wages grew 1.7 per cent, meaning increases in average pay have surpassed increases in prices for the first time since 2010.
Yesterday (15 April), ONS revealed inflation had fallen for the sixth consecutive month to 1.6 per cent due to downward pressure on prices in the transport, clothing and furniture and household goods sectors.
The turnaround in the ratio of wage rises to prices will provide a further boost for chancellor George Osborne, who is being credited for a faster-than-anticipated recovery but has faced regular criticism from the opposition over what Labour brands a “cost of living crisis”.
A perfect storm of above-target inflation fueled by global food and oil price increases and stagnating wages had meant that the average person has seen their net income fall in real terms for the past four years.
ONS also said the UK’s unemployment rate dropped below 7 per cent for the first in 5 years, according to data released today.
Figures from the Office for National Statistics (ONS) showed the number of people out of work fell by 77,000 to 2.24m in the three months to the end of February, which meant the unemployment rate fell to 6.9 per cent from 7.2 per cent in the three months to the end of January.
This means unemployment is now already below the threshold set by the Bank of England when it announced its forward guidance last year - a level it did not expect to be breached until the end of this year at the earliest.
Governor Mark Carney has since severed the link to unemployment which he described in February as “neither balanced nor sustainable”. Rates will now rise when “all the spare capacity in the economy” has been absorbed in the next two to three years.
