Employment in the UK rose by 160,000 in the three months to May, the largest increase in nearly four years, according to the latest labour market figures. However, the rise was entirely driven by part-time work and self-employment, while the number of full-time employees fell by 22,000 to 18.20 million.
Pay growth remains weak, with earnings excluding bonuses rising by just 1.4% year-on-year in May, the lowest rate since the end of last year. This represents a real pay cut of 2% when set against the annual CPI inflation rate of 3.4%. Private sector workers have been hit hardest, with earnings rising by only 0.6% year-on-year in May.
The Bank of England has expressed concern about rising inflation expectations, but there is little evidence that workers are securing higher pay to compensate. The bottom line is that UK households continue to face a significant squeeze in living standards as a result of the financial crisis, even though more people have found paying work.
Moreover, the squeeze from higher taxes and lower public spending has barely begun. With a £156 billion deficit to reverse, the economic outlook remains challenging for many families.
