By Daniel Hunter
Data released by the Office for National Statistics showed annual growth in average regular pay falling to just 0.8% in the three months to March 2013, the slowest increase since comparable records began in 2001.
At the same time, total pay (including bonus payments) growth dropped to just 0.4% over the same time period, its lowest since May 2009, as bonus payments took a tumble.
In addition, there are further signs of difficult conditions in the UK labour market as the number of unemployed workers rose by 15,000 in the three months to February 2013 compared to the previous quarter, while the level of employment fell by 43,000 people. The unemployment rate continued to stand at 7.8%, unchanged on the previous quarter.
Within the employment data, it is part-time workers that have seen the greatest job losses, with employment falling back by 53,000 over the quarter. The number of full-time workers rose by 10,000 over the same time period. However, for the remainder of those working part-time, 17.9% continue to only do so because they cannot find work with longer hours. This proportion has only been higher once, at 18.0% in May 2012, highlighting the ongoing difficulty of finding suitable employment.
After the economic gravity-defying performance of the labour market seen over the last year, the labour market looks likely to be flattish at best in 2013. Cebr predicts that the rate of unemployment will average 8.0% this year, as despite faster economic growth, businesses have resources to spare. In Q2 2013, the ICAEW/Grant Thornton Business Confidence Monitor showed that 58% of firms are operating below capacity.
With the cost of living continuing to rise faster than earnings growth, further real income erosions are likely. Annual inflation on the consumer price index stood at 2.8% in in March 2013, more than three times regular pay growth. We expect total pay growth to average just 1.3% across 2013; the squeeze on consumers looks set to continue.
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