The Tories have been accused of leaving the economy in “disarray” as figures revealed near record numbers of workers on zero hours contracts or off long-term sick.
Official data also showed more than 1.4million people out of work, while job vacancies fell for the 25th period in a row. The figures from the Office for National Statistics highlight the challenge facing the new Labour government.
Wage growth has slowed in what experts said was a sign that the jobs market was “cooling”. Average pay rose by 5.4% in the in three months to June, down from 5.8% in the three months to May. As inflation has also eased, so-called “real” wage growth dropped to just 2.4%.
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More than a million people are still on zero hours contracts, the data slow found. Labour has promised a crackdown on the practice as part of its New Deal for Working People.
Economic inactivity due to long-term sickness remains close to record levels, at 2.8 million. Elsewhere, the estimated number of vacancies in the UK in May to July was 884,000, a decrease of 26,000 or 2.8% from February to April.
Chancellor Rachel Reeves said: “Today’s figures show there is more to do in supporting people into employment because if you can work, you should work. This will be part of my Budget later in the year where I will be making difficult decisions on spending, welfare and tax to fix the foundations of our economy so we can rebuild Britain and make every part of our country better off”.
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TUC General Secretary Paul Nowak said: “The Conservatives left the economy in disarray. And workers are still suffering the consequences with a million people on zero-hour contracts, high unemployment, falling vacancies and huge numbers of people unable to work because of long-term sickness.
“The new government has already made an important start on a new approach that can create good quality new jobs, raise living standards, and help more people into work.
“The New Deal for Working People will give all workers the urgently needed right to a secure contract, and it will help boost incomes across the economy. And by bringing down NHS waiting lists and delivering a youth guarantee, the government can make sure more people are either earning or learning and set the UK jobs market on a stronger path.”
The ONS said the rate of unemployment was 4.2% over the three months to June, dropping from 4.4% over the previous three months. A consensus of economists had predicted an increase to 4.5% for the quarter.
Hannah Slaughter, senior economist at the Resolution Foundation, said: “Workers’ pay packets continue to grow coming out of the cost-of-living crisis, but the recent strong real wage growth is running out of steam as productivity stagnates and the jobs market cools.”
Economists reckon the Bank of England could hold interest rates at 5% – after a reduction in August – on the back of continued wage growth, before resuming cuts later in the year.