LONDON — UK workers saw their real earnings fall in the first quarter for the first time in two-and-a half years, despite unemployment dropping to its lowest in more than four decades.
Regular pay adjusted for inflation fell 0.2%, the Office for National Statistics said yesterday. Nominal earnings slowed to growth of 2.1%, an eight-month low. The unemployment rate fell to 4.6%, the lowest since 1975.
The figures are almost certain to fuel the debate over living standards as Britain prepares for a general election on June 8. Real earnings are still below their level before the 2008 financial crisis, and their recovery over the past two years is now going into reverse as the weak pound pushes up prices.
Inflation is heading toward 3% his year and squeezing consumer spending, the engine of the economy. In March alone, real earnings fell 0.5%, the biggest decline since July 2014.
For most Bank of England policy makers, the fact that earnings remain subdued despite a healthy labour market suggests there is still enough slack to keep interest rates at a record low.
While officials see wages rebounding next year, the outlook for 2017 is subdued as Brexit uncertainty and higher costs brought about by the ailing pound lead employers to clamp down on costs. — AFP