Rising inflation levels continue to stunt wage growth

Unemployment dropped by 50,000 to 1.53 million in the three months to April, which marks the lowest figure on record since the figures were first collated in 1975.

Official data yesterday showed inflation at an nearly four-year high of 2.9 percent in May.

A total of 1.53 million people were recorded as unemployed at the end of April, down 145,000 compared with a year earlier, the Office for National Statistics said in a statement.

While a joint record-high proportion of Britons are in work, the fall in real-terms wage growth pointed to tougher times ahead for consumers, the main drivers of economic growth.

In nominal terms, wages grew at the slowest pace since February 2016, rising an annual 2.1 percent in the three months to April and slowing from 2.3 percent in the first quarter.

"Accordingly, the forthcoming squeeze on real wage growth should be nowhere near as severe or prolonged as that seen after the financial crisis".

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With inflation averaging 2.4% over the three-month period andCPI jumping to 2.9% in April, UK real earnings are being squeezed significantly.

But TUC general secretary Frances O'Grady warned: "Unless this Government gets its act together, we'll soon be in the middle of another cost of living crisis".

"Ministers must focus on delivering better-paid jobs across the UK".

"Households are being squeezed from both directions, with inflation rising faster than expected and wages rising more slowly".

Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, says today's figures are reminiscent of 2011/2012 when inflation surged but wage growth weakened.

The latest drop in real wages reflects mounting pressure on household budgets, as the sharp drop in the value of the pound since the European Union referendum drives up the cost of goods imported from overseas and feeds through to higher shop prices.

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Matt Hughes, senior statistician at the ONS, said: "Many labour market indicators remain strong, with the employment rate at a joint record high and the inactivity rate at a joint record low".

Regular pay growth slowed from a 2.1 per cent annual rate in March, despite a labour market which has exhibited outward signs of tightness.

He said the sharp contrast between the poor record on pay and strong jobs performance shows that the currency-driven inflation felt by the country is not feeding through into wage pressures and is "simply making us all poorer instead".

He added: "In the longer term, we must fix the foundations of our economy by improving productivity growth through meaningful progress on a modern industrial strategy, with real change on the ground in skills, infrastructure and innovation".

Local government employment has fallen for the 14th consecutive quarter to reach 2.123m.

Rising prices for recreational and cultural goods and services were cited as the main reason for the latest inflation increase, with the fall in value of the pound continuing to result in more expensive imports.

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New work and pensions secretary David Gauke said: "This government wants to give everyone the opportunity to succeed, regardless of where they live or their background".

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