Unemployment rate falls to 3.6% in three months to July amid cost of living crisis

The number of UK workers on payrolls rose by 71,000 between July and August to 29.7 million, the Office for National Statistics said.

Unemployment is now at the lowest rate since May to July 1974.

However, UK workers saw their pay fall behind sky-high inflation despite another steep hike in earnings as the cost-of-living crisis hit hard the figures have shown.

The Office for National Statistics (ONS) said regular pay, excluding bonuses, grew by 5.2 per cent over the three months to July but,with Consumer Prices Index (CPI) inflation taken into account, real pay tumbled by 3.9 per cent year-on-year, according to the ONS.

It comes following latest figures showing the UK economy grew more slowly than expected in July as worker shortages and soaring costs weighed on activity amid the heightened risk of recession.

The Office for National Statistics said gross domestic product (GDP) rose by 0.2 per cent in July, after a sharp fall of 0.6 per cent in June when the additional bank holiday for the Queen’s platinum jubilee led to a decline in activity.

City economists had forecast a stronger 0.4 per cent recovery after the fall a month earlier. Reflecting weakness in the economy, GDP growth was flat over the three months to July, with a slump in the UK’s dominant service sector offset by stronger activity in industrial production and construction.

Retailers are competing for workers among themselves, and also with competing sectors like hospitality, Linda Ellett, KPMG‘s head of consumer markets, retail and leisure, said.

“It’s people in stores, people in the warehouses and logistics — they’re no longer seen as attractive roles,” Ms Ellett said. At the same time, retailers are “concerned about seasonal staff, particularly in the supply chain,” she added. About two weeks ago, John Lewis said it would recruit 10,000 holiday staff, offering workers would receive free meals in the period to help with the rising cost of living.

“If things like food and hygiene products are available, then that’s savings that workers can make, so that is a creative way of making employment more attractive that costs less to the retailer than paying more money to workers,” Ms Ellett said.

The Government’s move to freeze energy bills at £2,500 is set to rein in the peak in inflation, but wages are still unlikely to keep pace with rising costs.

The ONS added that total pay including bonuses lifted by 5.5 per cent for the three-month period, falling by 3.6 per cent with inflation taken into account.

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