Jobless rate in UK reaches 40-year low of 2.3%

UK jobless-benefit claims fell to the lowest level in four decades and pay growth accelerated in an electoral boost for prime minister David Cameron.

According to the last labour market report before the May 7 general election, the claimant count fell for a 29th month in March to 772,400, the lowest since 1975, the Office for National Statistics in London said yesterday.

A wider measure of unemployment declined to the least since 2008 in the three months through February and basic pay growth accelerated to 1.8%.

Cameron is struggling to turn a buoyant labour market into votes for his Conservative Party, which is continuing to run neck-and-neck with the Labour opposition three weeks before Britons go to the polls.

With inflation at zero, households are enjoying the most sustained real wage growth since the financial crisis. The Bank of England has held its benchmark interest rate at a record-low 0.5% until 2016.

“Adjusted household income growth will be strong this year, which bodes well for consumer spending,” said James Knightley, an economist at ING Bank NV in London. “As such, we are still in the camp that predicts higher BOE interest rates before the end of the year.”

Jobless claims fell 20,700 last month, taking the rate to 2.3%, the lowest for 40 years. Unemployment based on International Labor Organisation methods declined 76,000 to 1.84 million in the three months through February and the rate dropped to 5.6%, both the lowest in more than six years. Employment increased by 248,000 to a record 31.1 million people.

“We are living through a jobs miracle — brought to you by a Conservative government that has backed business, reformed welfare and rewarded work,” Cameron said on a visit to a Fujitsu plant in central England as the company announced the creation of 750 jobs.

“So as long as I’m prime minister, I’m going to put job creation front and centre of any government I lead.”

Annual pay growth excluding bonuses accelerated from 1.6% in the period through January. In February alone, wages rose 2.2% from a year earlier, up from 1.6% in January and the biggest increase since 2011.

Private-sector pay growth jumped to 2.6% in February, the most since 2009. Pay growth in finance and business services rose to 3.4%, the strongest since March 2012. The statistics office said there is some evidence of banks shifting some pay from bonuses to regular pay, though it’s too soon to gauge the full effect.

Wage growth including bonuses slowed to 1.7% in the latest three months from 1.9%.

The number of job vacancies increased to 743,000 in the first quarter, the highest since comparable records began in 2001.

- Bloomberg