Figures released today showing a 146,000 drop in unemployment is overshadowed by below inflation wage growth and a surge in sickness benefit claimants.

Despite a falling demand for jobs employers remain reluctant to increase salaries at a time when living costs continue to severely outstrip wage rises.

The number of people claiming Jobseeker’s Allowance fell by 146,000 to 6.2% in the last quarter (May – July, 2014), according to the latest figures from the Office for National Statistics (ONS). The number of people in work increased by 74,000 over the same period.

So where did the others go if they didn’t enter work? This may at least partly be explained by a surge in the number of people claiming out-of-work sickness and disability benefits, who aren’t included in the headline unemployment figure. This is supported by ONS figures which show an increase in the ‘economically inactive’ rate (22.1%) – a closer reflection of the true(ish) unemployment rate in the UK.

ONS statistics also show that pay has increased by just 0.7% (excluding bonuses) over the last year. This is well below the Consumer Price Index (CPI) inflation rate – the measure used to calculate the cost of living – of 1.5%.

Today’s headline unemployment figures cannot mask over the fact that wages remain stubbornly low and families are continuing to struggle. They show that moving out of unemployment and into work no longer provides an automatic route out of poverty. For the first time since records began there are now more working people living in poverty than unemployed people.

Low wages have also played a significant role in a 59% surge in the number of working people claiming Housing Benefit since 2010. It’s estimated that this will cost taxpayers an additional £5 billion by 2015 and rubbishes the ‘skiver’ versus ‘striver’ rhetoric employed by certain sections of the media.

The Key Figures:

  • Comparing the estimates for May to July 2014 with those for February to April 2014, employment continued to rise and unemployment continued to fall. These changes continue the general direction of movement since late 2011/early 2012.
  • There were 30.61 million people in work. This was 74,000 more than for February to April 2014, the smallest quarterly increase since April to June 2013. Comparing May to July 2014 with a year earlier, there were 774,000 more people in work.
  • The proportion of people aged from 16 to 64 in work (the employment rate), was 73.0%, slightly higher than for February to April 2014 (72.9%) and higher than for a year earlier (71.6%).
  • There were 2.02 million unemployed people, 146,000 fewer than for February to April 2014 and 468,000 fewer than a year earlier. This is the largest annual fall in unemployment since 1988.
  • The unemployment rate continued to fall, reaching 6.2% for May to July 2014, the lowest since late 2008. The unemployment rate is the proportion of the economically active population (those in work plus those seeking and available to work) who were unemployed.
  • There were 8.93 million people aged from 16 to 64 who were out of work and not seeking or available to work (known as economically inactive). This was 114,000 more than for February to April 2014 but 31,000 fewer than for a year earlier.
  • The economic inactivity rate was 22.1%, higher than for February to April 2014 (21.8%) but lower than for a year earlier (22.3%).
  • Pay including bonuses for employees in Great Britain was 0.6% higher than a year earlier. Pay excluding bonuses for employees in Great Britain was 0.7% higher than a year earlier.

Stephen Timms MP, Labour’s Shadow Employment Minister, responding to today’s Labour Market Statistics, said:

“Today’s fall in overall unemployment is welcome, but the new figures have shown working people are seeing their pay falling far behind the cost of living.

“Pay excluding bonuses today is the lowest on record. Under this Government wages after inflation have already fallen by over £1,600 a year since 2010 and by next year working people will have seen the biggest fall in wages of any Parliament since 1874.

“A Labour government will freeze gas and electricity bills, raise the minimum wage and get more homes built to tackle the cost-of-living crisis.”

TUC General Secretary Frances O’Grady said:

“Last week the Governor of the Bank of England said the fall in real wages is the worst since the 1920s and today’s figures show it getting worse. Pay increases are less than half the rate of inflation, so living standards keep on falling.

“More people are working, but growth based on more low-paid jobs isn’t working for Britain. We need jobs that ensure everyone gets a fair share in the growing economy through real increases to their wages.”

Secretary of State for Work and Pensions Iain Duncan Smith said:

“Creating jobs is central to building a stronger, more resilient and stable economy. With millions more people in private sector employment under this government, it is clear that our long-term economic plan is helping Britain to recover following one of the deepest recessions in living memory.

“All of our reforms are focused on helping people off benefits and into work – giving people the peace of mind and security that comes with a steady income.

“With the number of people claiming the main unemployment benefit down below 1 million for the first time in 6 years, we are helping people to break free from welfare dependency, look after themselves and their families, and play their part in getting our country back to work.”