The sound you heard at 9:30 this morning was the popping of a thousand champagne corks in response to the latest Labour Market Statistics. The headline figures are very encouraging: the unemployment rate for December to February was, at 6.9 per cent, 0.2 percentage points lower than for September to November, and below the level that would once have had Mark Carney considering interest rate hikes. And some of the below-headline figures are encouraging, too: pay rose by 1.7 per cent, which is higher than the 1.6 per cent inflation rate announced yesterday.

Huzzah! The squeeze is over! Well, no, actually – not really. I’d advise ConHome readers to keep the champagne on hold, at least for now. Here are some reasons:

  • Even if pay is now rising faster than prices, the difference is minimal. A 0.1 percentage point gap between the two suggests that real wages are basically flat.
  • Or are they even that? The 1.7 per cent figure I gave above is for pay including bonuses. The figure for pay excluding bonuses is 1.4 per cent.
  • In fact, it’s not ideal to be setting these pay figures against yesterday’s inflation number. The former compare pay from December to February this year with pay from December to February last year. The latter compares prices in March with last March.
  • Besides, folk will still be feeling squeezed across the longer term. As Capital Economics have pointed out (hat-tip: Reuters’ Jamie McGeever), real pay is still 10 per cent below its 2008 peak.
  • Continuing numbers like today’s could spur a hike in interest rates. That would, in some ways, be seen as a mark of economic success. But it would also impose a new squeeze on some families’ budgets.

This isn’t to disparage today’s figures: they show that we’re hastening towards the day when pay definitely outstrips inflation.

But it is to highlight some of the political truths surrounding the economy. Today’s numbers can be debated endlessly by politicians, but they won’t mean much for voters in those northern and midlands marginals that we like to focus on. It’s as Nick Faith suggested on this site yesterday: people notice things like the price of petrol. It’s an altogether different matter to implant notional pay figures in their minds, and then link them to the Government’s economic policy.

In this respect, Tory MPs might do better to highlight some of the other numbers in the Labour Market Statistics – at least for now. The table I’ve pasted below (click for a larger version) is a good ‘un. It shows the change in various employment measures since the last quarter. You’ll notice that, along with the South West, the North East and the North West are two of the best performing regions in that time…

Regions table