Figures released today by the ONS show a fall in the UK unemployment rate to just 4.4% in the second quarter of this year, which is the lowest rate since 1975. In absolute terms this equates to an extra 125,000 people in employment since the first quarter of 2017.
Nominal wage growth has picked up to 2.1%, after several months of slowing. However, the effects of inflation over this period of 2.6% leaves real wages in negative territory, down 0.5% on last year. This means consumer spending power is still being squeezed - not great news for retailers who are facing challenges on many fronts.
The pick-up in wage growth is a positive sign, and with the number of unemployed per job vacancy also falling in recent months, economic theory would suggest that pressures on wages in future will be upwards. However recent history has showed us that reality can defy economic models. A combination of job creation in less productive areas of the economy, increases in flexible working contracts and technology weakening bargaining power of workers have led to slowing wage growth despite a tightening labour market. So it may be too early to call an end to the real wage squeeze. We will have to wait and see.