What's going on?
Unemployment in the UK was expected to decline slightly in December but data released on Wednesday showed that it remained steady at 5.1%. Earnings growth (e.g. how much people make) grew 1.9% – the lowest level since almost a year ago.
What does this mean?
The paltry earnings growth is probably somewhat of a problem. It reflects the fact that there likely remains a significant number of people who are “underemployed,” i.e. they would prefer to be working more than they are and are thus prepared to accept a low wage when the opportunity for more hours comes along. Moreover, the fact the unemployment rate didn’t decline is possibly a reflection of a somewhat slowing economy – but it’s worth remembering that it remains amongst the lowest unemployment rates in Europe.
Why should I care?
The bigger picture: Worker productivity has declined (supposedly). That means that the economic output per worker has gone down. That’s not good news for wages because companies have to then employ more people to get the same output and they don’t want their personnel costs to rise a lot, so average earnings decline.
For you personally: Pressure on pay probably isn’t good news for you. Historically, earnings have risen about 4% per year in the UK – so for the annualized figure to be less than 2% is disappointing. Nevertheless, this is still above the level of inflation (a.k.a. the rate at which prices are rising), so real incomes are improving. So it’s kind of a mixed bag, really.