The monthly jobs report from the UK was a mixed bag with the unemployment rate falling to a 42-year low at 4.5%, down from 4.6% previously. Despite the solid headline, wages continued to disappoint.

The unemployment rate fell to 4.5% and marked the lowest unemployment rate in the UK since 1975. Official data from the UK’s Office for National Statistics also showed that the number of people out of work and claiming benefits fell by 64,000 during the three months of March through May.

The employment rate also jumped to 75.9%, marking a record high.

UK Employment Rate (Source: ONS)

Construction and accommodation and foods services sectors showed the highest increase in creating jobs.

The proportion of jobs that accounts for manufacturing, mining and quarrying sectors fell to 7.7% from 26.4% between the periods of June 1978 when record keeping started through March 2017. Services sector, on the other hand, increased from 63.2% to 83.5% during the same period.

Wages continue to fall

Despite the upbeat unemployment rate, evidence of wage growth continues to evade. The unemployment report showed that the average weekly earnings in nominal terms increased 1.8% which also includes bonuses. This was for the period of March through May.

UK Wage Growth (Source: ONS)

Excluding bonuses, wages rose 2.0% on a year over year basis. This showed a somewhat modest improvement, up from 1.7% in April and slightly above the consensus estimates of 1.9%.

Compared to inflation, which stands at 2.9% as of May, the gap between wage growth and inflation continues to widen.

Commenting on the report, Matt Hughes, a senior statistician from the ONS said that the overall picture of the UK’s labor market was little changed from the previous month. Hughes said that although the jobs picture was strong, “there has been another real-terms fall in total earnings, with the growth in weekly wages low and inflation still rising.”

Real wage growth which takes into account inflation rate, however, turned negative on a year over year basis. According to the ONS’ report, real wages excluding bonuses declined 0.5% in the three months to May.