Two specific developments leap out of today’s jobs data.
Firstly, that employment in the UK economy is at an all-time high of just over 32 million and that the jobless rate has fallen to a better than expected 4.4%, the lowest since 1975.
Secondly, despite that good news, average earnings are growing at a nominal rate of just 2.1%, compared with the headline inflation rate of 2.6%, equating to a real-terms fall of 0.5%.
These two developments should not, according to classic economics, be compatible. In theory, in a tight labour market, wages should be pushed higher.
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The relationship between low unemployment and higher inflation was first highlighted by William Phillips, a professor at the London School of Economics, in 1958. The Phillips Curve, in which he proved the relationship, is still taught today even though it has been disputed since by other economists.
There are various reasons why the relationship may have broken down.
The most obvious is that job insecurity remains very high. This has been the case since the financial crisis, with many workers concluding it was in their interest to forego pay rises, or not push for them, if it meant they were more likely to keep their job.
Another explanation is that the workforce has become more fragmented and trade union membership has fallen. Workers are less able than they once were to band together and bargain on a collective basis for higher wages, particularly when self-employment is rising.
Image: In theory, in a tighter labour market should mean wages are pushed higher
Further explanations include the introduction of the national living wage. It is possible that some employers, having had to award pay increases to their lowest-paid workers, have decided against giving pay rises to their other employees.
In a similar vein, it is possible that some employers, faced by mounting pension deficits, are having to shovel money into retirement schemes, at the expense of pay rises for employees.
An additional factor is that productivity has fallen. Without improvements in productivity, employers cannot afford to pay their workers more.
Another theory, put forward by the economics team at Deutsche Bank, is that the Phillips Curve is actually “alive and kicking” when wages are adjusted for productivity.
They argue: “Dreadful post-crisis productivity, and large labour market slack up to the 2013 recovery, largely explain disappointing pay growth.”
They agree that more recent weakness in wages growth is due to pay restraint “in the face of Brexit uncertainty”.
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The good news is that, buried in today’s figures, there are signs that job security is starting to improve.
For example, while there were still 883,000 people on so-called ‘zero hours’ contracts during the April to June quarter, that was 20,000 fewer than in the same period last year.
Another cause for optimism is that more jobs being created are full-time. All of the increase in employment during the last year has been in full-time work – with the number of people working part-time having fallen.
The rate of self-employment is also slowing. In the same period last year, self-employment was growing at a rate of 6%, but this year it was just 1%.
Meanwhile, although the figures were slightly down on the previous quarter, there were 768,000 job vacancies in the three months to July. Businesses are still creating jobs and looking for workers.
So there are plenty of causes for optimism. Ministers will be hoping desperately that, before long, the classic relationship between low unemployment and wage inflation reasserts itself.
Few things would do more to engender more cheeriness in a country that feels, this summer, pretty grumpy.