The outlook remains fragile – this improvement is driven by part time working and self employment, while full time employment continues to fall. But the mild improvement continues to suggest that the economy may be growing once more after dipping back into recession.
Despite the improvement, the rate of pay growth continued to fall, meaning that the growth in wages continues to be well below inflation (see Figure 3). This reflects weak productivity growth in the UK economy, which was just 0.2 percent higher in Q4 2011 than a year earlier.
Unemployment has fallen by 0.2 percentage points since the turn of the year, following an increase of 0.7 percentage points between June and December 2011. This reversal is positive, although the decrease is relatively small given the previous rise.
Despite inflation continuing to squeeze living standards, wage growth fell sharply in the 12 months to March 2012 relative to the 12 months to February. Total pay fell by 0.5 percentage points to 0.6 percent. This was even more pronounced in the private sector – total pay increased by just 0.3 percent.
Much of the slowdown in wage growth was driven by lower bonus payments. This was most marked in the financial and business services and construction sectors, where bonuses fell by 16.2 percent and 18.2 percent respectively.
Interestingly the part of the banking sector that is under public ownership did not see similar falls in its bonus payments. While public sector bonus pay excluding financial services fell by 2.4 percent, total public sector bonus pay increased by 15 percent.