But, while employment growth is improving, lacklustre wage growth continues to put a dampener on the statistics. According to the Office of National Statistics, wage growth came in at 1.9% for the final quarter of 2015, the lowest level of the past 12 months.
According to Ben Brettell, senior economist at Hargreaves Lansdown, the decelerating wage growth underlines the lack of inflationary pressure coming from the labour market.
“Indeed, continued low price inflation could be depressing wage inflation as it leads workers to accept lower pay settlements – leading to a vicious cycle where both price and wage increases remain depressed,” Brettell said.
But, he added: “with CPI inflation at 0.3% and wages increasing at 1.9%, this still means workers are experiencing pay rises in real terms. Combined with extremely low energy prices this should continue to support consumer spending.”
Neil Carberry, CBI Director for Employment and Skills, said the lacklustre pay growth underlines the need for a pickup in productivity before wages can rise faster.
One solution to the problem, he said would be to stimulate innovation by broadening access to existing R&D incentives and not adding to the cumulative burden on businesses, from recent Government policies, firms would be able to both create more jobs and boost productivity.
