CBI Confederation of British Industry : Pertemps Labour Market Update January 2016

Today's data revealed a strong rise in the number of people in work as well as a fall in unemployment, demonstrating that the labour market continues to be a bright spot for the UK economy.

The number of people in work increased by 267,000 in the three months to November, the largest rise in around 18 months. At the same time, the employment rate edged up a little further to 74.0%.The rise in employment was due to an increase in the number of people working for a business as well as an increase self-employment.

Continuing the good news story, as UK employment rose, unemployment fell. The number of people unemployed in the UK declined by 99,000 in the three months to November. This means that 1.68 million people are now out of work and looking for work. The unemployment rate fell back to 5.1%, which was slightly lower than most people had expected (5.2%). Positively, the unemployment rate is now a touch lower than just before the crisis began (5.2%), and is the lowest since early 2006.

Although the labour market picture so far is positive, today's data reveal more mixed prospects for peoples' pay packets. In the private sector, annual growth in regular pay (excluding bonus) stood at 2.1% in the three months to November. This was down from 2.3% in the three months to October and from a peak of 3.4% in the three months to May.

Despite this, low inflation has boosted the 'real' value, or purchasing power at the till, of employees' pay packets. But, with inflation likely to pick up gradually this year, there is a real need to boost 'nominal' pay growth. To do this, there must be a sustained recovery in productivity.