Despite the latest encouraging jobs figures, an economy where earnings have failed to keep pace with inflation for 40 straight months shows little reason for optimism
Wednesday's jobs figures contained some encouraging signs for green-shoots watchers: employment growth resumed, with 24,000 more people in work, and unemployment declined, albeit by a marginal 5,000. That suggests the weaker period at the start of the year may have been a blip, instead of the start of a renewed downturn in the labour market.
But the broad picture in the UK remains of a workforce watching helplessly as wage growth is relentlessly outpaced by the increase in the cost of living. As thinktank the Resolution Foundation points out, earnings have now been failing to keep up with inflation for 40 straight months.
That's precisely the picture set out by the Institute for Fiscal Studies in its latest research, of employees holding on to their jobs but continuing to accept declining real wages in exchange for not being chucked on the scrap heap.
Overall earnings growth actually picked up, rising by 1.3% a year in the three months to April. But that is likely to reflect bonuses being pushed into the new financial year, as the top rate of income tax was reduced from 50p to 45p. Without bonuses, pay growth remained painfully weak, at 0.9% – less than half the rate of inflation.
As the IFS pointed out, there are structural reasons for this, not least the collapse of trade union bargaining power. And as they also pointed out, staying in work albeit on declining real wages is far better than trying to manage on unemployment benefit.
But for politicians hoping for a return of the feelgood factor – or economy watchers pinning their hopes on a revival in consumer spending – there is, as yet, little reason for optimism. As Resolution's James Plunkett puts it, "we know that this trend is almost certain to continue through 2014 and into 2015 before there's a realistic prospect of wages beginning to recover. Even then it is likely to be several years before wages return to levels seen before the recession."