Britain’s labour market grew strongly despite a surge in coronavirus infections late last year, with vacancies hitting a record 1.25 million in the fourth quarter and unemployment falling unexpectedly.
The number of people on company payrolls rose 184,000 in December, stronger than the pace expected, the Office for National Statistics data showed Tuesday. The jobless rate dropped to 4.1% in the quarter through November, the best reading since June 2020.
Together, the figures suggest strength in the economy that may encourage the Bank of England to retain its focus on inflation. Policymakers boosted interest rates for the first time in the pandemic last month, and investors anticipate another move at their next meeting on Feb. 3 as inflation threatens to surpass 6% this year, triple their target.
“Assuming that restrictions are lifted potentially as soon as next week, the labour market could become even hotter, vindicating the Bank of England’s hawkish stance before Christmas,” Yael Selfin, chief economist at KPMG UK.
“Another big surge in payrolls in December will make it very hard for the Bank of England to resist lifting interest rates again in February. Beyond that, we expect policymakers to be more cautious about tightening as wage growth keeps cooling and real incomes face significant pressure from soaring inflation,” says Dan Hanson, Bloomberg Economics.
There was another increase in the number of people who have left the workforce. That both explains why many firms are struggling to recruit staff and suggests rigidity in the labour market that may hold back the ability of companies to grow.
Inactivity in the quarter through November rose to 8.78 million working-age adults not in the jobs market, up by 66,000. There also were 459,000 fewer people in work than at the end of 2019, before the pandemic.
In normal times the workforce would have grown in the past two years. The shortfall helps explain why there are job shortages, with vacancies continuing to rise as jobs are left unfilled.
“As each month passes these issues appear to be getting worse, with the recovery clearly stalling on the eve of the Omicron outbreak,” said Tony Wilson, director of the Institute for Employment Studies. “This weak performance is being driven in particular by fewer older people in the labour market, especially fewer older women, and more people out of work due to long-term ill health.”
The number of European Union workers in the U.K. fell by 110,000 to 2.23 million in the three months to September from the previous quarter, the legacy of Britain’s decision to leave the bloc.
Wage growth slowed as expected to 4.2% in the three months through November, down from 4.9% previously. Excluding bonuses, the rate was 3.8% and 3.5% in November alone. That suggests that a squeeze on living standards intensified, with pay growth not keeping up with inflation.
“The jobs market is thriving, with employee numbers rising to record levels, and redundancy notifications at their lowest levels since 2006 in December,” Chancellor of the Exchequer Rishi Sunak said in a statement.
Downward revisions to past data flatter the payroll figures. Although the official increase was 183,000 the rise was just 35,000 compared with the figures announced in December.
IMAGE SOURCE: Vox.com