Pay squeeze intensifies as employment levels reach record high

Unemployment is now at its lowest rate in 42 years.

In June was 4.6%. Today's figures reveal it is now at 4.5%.

Correspondingly the employment rate is at a record high of 74.9%, up 0.1% from last month.

This is likely to create challenges for employers when it comes to meeting their staffing needs.

And if free movement of labour from the EU does end with Brexit (as it currently seems will be the case) this will significantly exacerbate matters.

At the same time wage growth continues to fall. This is as expected - it's a story I've been telling for quite a while now.

It was 2.1% in April. In May it was 1.8% (it hasn't been this low since October 2014).

This reinforces the by now familiar story - real wages are falling (real average weekly earnings fell by 0.7% compared to the year earlier) - i.e. wages are not keeping up with inflation - and consumers are facing the squeeze. Last month we saw real wage growth turn negative for the first time since 2006.

Looking ahead to the interest decision next month, falling wage growth coupled with the recent slew of negative economic data makes it less likely we will see a Bank of England interest rate rise in August.