UK unemployment falls below pre-Covid level but inflation hits wages

theguardian.com:

Unemployment in the UK has fallen below pre-Covid levels, but high inflation amid Britain’s cost of living crisis means average wages fell at the fastest rate since 2014.

The Office for National Statistics said the unemployment rate fell to 3.9% in the three months to January, dropping below the 4% rate last in February 2020 before the coronavirus pandemic took hold in the UK.

However, while a sharp rise in employment amid record job vacancies highlighted a steady recovery in the labour market from Covid, the latest figures show average wages plunged after taking into account high rates of inflation.

Against a backdrop of soaring energy bills and the rising cost of the weekly shop, the ONS said annual growth in regular pay, excluding bonuses, fell by 1% after adjusting for its preferred measure of inflation in the three months to January – the biggest fall since July 2014.

The latest snapshot showed the number of job vacancies rose to a fresh record high of 1.3m, suggesting a sustained increase in demand for workers after the end of furlough and despite the emergence of the Omicron variant hitting the economy.

Employment continued to rise over the period, although the official employment rate remained one percentage point below pre-pandemic levels amid a decline in the number of self-employed workers and more older staff leaving the workforce.

Analysts said the strength in the labour market suggested the Bank of England was likely to increase interest rates again on Thursday in response to soaring inflation. Average wages, including bonuses, rose at an annual rate of 4.8% before taking account of inflation – a faster rate than expected by City economists.

Rishi Sunak, the chancellor, said the government’s economic support