UK unemployment falls below pre-pandemic level

Jobless rate at 3.9% in three months to January despite Omicron coronavirus wave

Britain’s unemployment rate fell below its pre-pandemic rate in the three months to January, even as the country was under the Omicron wave of coronavirus, while pay rose faster than expected, official figures showed on Tuesday.

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.

The jobless rate dropped more than expected to 3.9 per cent, in from 4.1 per cent in the last quarter of 2021, its lowest since the three months to January 2020, according to the Office for National Statistics (ONS).

The number of job vacancies hit a fresh record high in the three months to February at 1.318 million, underscoring the labour shortage facing many employers.

Average earnings in the three months to January were 4.8 per cent higher than a year earlier, above forecasts in a Reuters poll for a 4.6 per cent rise.

While this is barely keeping up with the rate of inflation – and equivalent to a 0.1 per cent real-terms pay rise using the ONS’s preferred CPIH inflation rate – it represents faster pay growth than in the run-up to the pandemic.

Although British economic output is now slightly higher than before the pandemic, its labour force has shrunk – largely due to workers aged 50 and over dropping out, often to retire early.

Tuesday’s figures showed employment fell by 12,000 in the three months to January, below poll forecasts for a rise of 23,000.

Less reliable preliminary payroll figures for February – which are based on tax data that does not include the self-employed – showed a monthly increase of 275,000. But January’s increase was revised down to 61,000 from 108,000.

British finance minister 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. – Reuters