Britain's unemployment rate fell below its pre-pandemic rate in the three months to January despite the Omicron wave of coronavirus, however wage growth was offset by soaring inflation and the biggest wage squeeze since 2014.
Unemployment dropped to 3.9 per cent from 4.1 per cent, its lowest level since the three months to January 2020, according to the Office for National Statistics, while 275,000 were jobs added to the UK economy in February.
“The labour market continues to recover from the effects of the pandemic, with the number of unemployed people falling below its pre-pandemic level for the first time and another strong rise in employees on payroll in February,” said ONS chief economist Grant Fitzner.
“However, the number of people out of work and not looking for a job rose again, meaning total employment remained well below its pre-pandemic level.”
Regular pay growth, which excludes bonuses, picked up to 3.8 per cent in the three months to January, but the acceleration was offset by inflation which hit 5.5 per cent in January.
When taking rising prices into account, wages were down 1.6 per cent compared with a year earlier, according to the ONS.
Experts have warned that the pressure on household finances will intensify due to the Ukraine conflict, with eye-watering gas and fuel prices set to see inflation rise from 5.5 per cent currently to nearly 9 per cent or more in April.
The number of job vacancies hit a fresh record high of 1.318 million in the three months to February, a 105,000 jump from the previous quarter, underscoring the labour shortage facing many employers.
Tuesday's data is unlikely to ease concerns at the Bank of England that high inflation caused by soaring energy prices and post-Covid bottlenecks could prove slow to dissipate.
Although British economic output is now slightly higher than before the pandemic, the labour force has shrunk — largely due to workers aged 50 and over dropping out, often to retire early.
UK Chancellor of the Exchequer Rishi Sunak said he was confident that the labour market was “in a good position to deal with the current global challenges”, with redundancies at record lows.
“We know people are concerned about the rising cost of living so alongside continuing to help people find great jobs we’re providing direct support worth more than £20 billion ($26bn) this financial year and next,” Mr Sunak said.
