Unemployment falls to lowest level since 1974

Unemployment has fallen to its lowest level since 1974, currently sitting at 3.6% for the three months to July, according to the latest figures from the Office for National Statistics (ONS).

The ONS also found that while unemployment fell there was also a decrease in the employment rate, while the economic inactivity rate increased.

Meanwhile, total hours worked decreased compared with the previous three-month period. Total actual weekly hours worked decreased by 3.5 million hours to 1.04 billion hours in May to July 2022. This is still 11.1 million hours below pre-coronavirus pandemic levels.

The UK employment rate was estimated at 75.4%, 0.2 percentage points lower than the previous three-month period and 1.1 percentage points lower than before the coronavirus pandemic.

The ONS added that the UK economic inactivity rate was estimated at 21.7%, 0.4 percentage points higher than the previous three-month period, and 1.5 percentage points higher than before the coronavirus pandemic.

In terms of wages, regular pay excluding bonuses increased by 5.2% over the period, however when inflation is taken into account, real pay has decreased by 3.9% year-on-year.

Yael Selfin, chief economist at KPMG UK, told Sky News: “Despite the growth in employment, total weekly hours worked fell from the previous quarter, resulting in a drop in average hours.

“This suggests that weakening demand has so far led firms to use their staff for fewer hours rather than lay them off, consistent with the relatively low levels of unemployment.Pay packets continue to be squeezed as nominal pay growth hasn’t kept up with soaring inflation.”

She added: “As long as demand for staff remains high, this could encourage workers to look for better opportunities and secure a higher pay elsewhere.”