Pay growth in the UK has started to edge up amid signs that the lowest unemployment since the mid-1970s may be boosting the bargaining power of workers.

Figures from the Office for National Statistics showed that earnings growth in the three months to June was 2.1% higher than in the same months of 2016 – up from 2.0% in the three months to May and a recent low of 1.8% in April.

The ONS said unemployment in the quarter ending in June was down 57,000 on the previous three months at 1,484,000. The jobless rate fell to a fresh 42-year low of 4.4%. Employment was up by 125,000 at 32.1 million in the three months to June, the highest since modern records began in 1971.

Despite the acceleration in earnings growth, living standards remained under pressure because pay has failed to keep pace with inflation, which stood at 2.6% in June.

Ruth Gregory, the UK economist at Capital Economics, said: “The latest labour market figures provided some signs that the tightening in the labour market may be leading to a recovery in wage growth at long last.” Gregory added that the increase in employment had beaten consensus expectations of a 97,000 rise.

The City responded to the latest unemployment and earnings data by pushing up the value of the pound against the dollar by half a cent on the foreign exchanges.

A tighter labour market is seen as strengthening the hand of the hawks on the Bank of England’s monetary policy committee who are pressing for an increase in interest rates.

The ONS reported that the availability of work in the UK continues to attract workers from overseas, but found that the rate of increase had slowed over the past year.

Between April to June 2016 and the same three months of 2017, non-UK nationals from the EU working in the UK rose by 126,000 to 2.37 million while in the previous year there had been an increase of 242,000. There was a fall of 18,000 in workers from the rest of the world in the latest year.

Matt Hughes, the ONS senior labour market statistician, said: “The employment picture remains strong, with a new record high employment rate and another fall in the unemployment rate. Despite the strong jobs picture, however, real earnings continue to decline.

Source: The Guardian