The UK unemployment rate fell to 6.8% in the three months to March 2014, from 6.9%, according to figures from the Office for National Statistics (ONS).
Prime minister, David Cameron, welcomed the news but said there was “more to do”, despite the unemployment rate falling to its lowest level in over five years.
The new figures will give a boost to the government’s “economic recovery” plans, which has been criticised by the Labour party for creating a “cost of living crisis” where wages are failing to keep up with the cost of living.
However, for the first time since 2010, average weekly earnings, including bonuses, are outpacing inflation.
Despite the positive signs, consumers are unlikely to have experienced a significant improvement to their finances over the past year.
Wages growth excluding bonuses slower than inflation
When the average earnings figures exclude bonuses, wages fall short of inflation, as measured by the Consumer Prices Index.
Inflation for March 2014 stood at 1.6%, with wages excluding bonuses seeing a growth on the previous year of just 1.3% and, with bonuses, 1.7%.
Meanwhile, the Office for Budget Responsibility’s forecast that real incomes will not return to 2008 levels until at least 2018, remains unchanged.
The British Chamber of Commerce (BCC) said the “recovery is clearly moving ahead” while pointing to the UK jobs market’s resilience and flexibility.
“To consolidate the upturn, we need to see rises in productivity, which would make it possible for higher pay rises to be affordable. In addition, we need to see tougher action on youth and long term unemployment,” BCC Chief economist, David Kern said.
‘Overstating the recovery’
The fall in the unemployment rate was partly due to an increase in people becoming self-employed, with the number of people classed as self-employed rising by 375,000 to reach a total of 4.55 million.
Schroders European economist, Azad Zangana, said the rise in self-employed workers “are helping to lower the unemployment rate, but may be overstating the recovery in the labour market.”
The figures are unlikely to hasten the Bank of England’s decision to increase the interest rates from the record-low rate of 0.5%.
Governor of the Bank of England, Mark Carney said that “the economy has started to return to normal” but that there are no plans to raise interest rates until 2015.
Even then, the Bank of England predicts that the interest rate will only rise to 1.2% in 2015, and possibly 2% by 2016.