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Unemployment eases as firms rush to fill record levels of vacancies

By Abigail Townsend

Date: Tuesday 18 Jan 2022

Unemployment eases as firms rush to fill record levels of vacancies

(Sharecast News) - The UK unemployment rate has eased, official data showed on Tuesday, as companies continued to hire more staff despite the emergence of the Omicron variant.
According to the latest data from the Office of National Statistics, there were 29.5m payrolled employees in the UK in December, up 184,000 on November's revised figure, and 409,000 higher than in February 2020.

Analysts had been looking for an increase closer to 125,000.

The broader unemployment rate for September to November eased by 0.4 percentage points to 4.1%, marginally below consensus for 4.2%. The rate is now just 0.1 percentage points higher than before the pandemic.

The employment rate remains 1.1 percentage points below pandemic, however, at 75.5%, in part because of a rise in the economic inactivity rate, which is now estimated at 21.3%, 1.0 percentage point higher than before the pandemic and 0.2 percentage points higher than the previous three-month period.

Economic activity is defined as people who are not actively looking for work and/or are not available to start work immediately.

Job vacancies also remained high, rising to a new record in October to December of 1,247,000, up 462,000 on the pre-pandemic level seen in January to March 2020.

Regular pay in the three months to November fell to 3.8% year-on-year from 4.3% in the previous month.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The burden of the withdrawal of the furlough scheme at the end of September and the Omicron hit to consumer services demand has fallen squarely on the shoulders of employers, not their staff.

"Meanwhile, the further rise in payroll employee numbers in December provides reassurance that business did not immediately fire staff when demand weakened in response to Omicron, though recent provisional estimate have been revised downwards substantially."

Looking ahead, however, Tombs noted: "Employment growth likely will slow from the strong pace seen over the last nine months. Few people who want a job don't have one currently. In addition, April's increase in employer's National Insurance contributions likely will undermine demand for labour.

"At least immigration should pick up, as the impact of the pandemic on international labour mobility eases, but inflows will fall well short of the levels when the UK was an EU member."

Kitty Ussher, chief economist at the Institute of Directors, said: "The legacy of the pandemic appears to be [the] rise in economic inactivity. [The] data shows inactivity is particularly pronounced in people over the age of 50 with, sadly, a rise in long-term sickness in this group the driving factor."

Matthew Percival, director of employment at the CBI, said: "Rising inflation means that squeezed incomes joins the difficulties firms are facing filling vacancies as major challenges in the UK labour market."

Martin Beck, chief economic advisor to the EY Item Club, said: "The latest set of labour market numbers reinforced hopes that job losses arising from the end of the furlough scheme in September were offset by strong demand for workers elsewhere in the economy."

Beck added that the fall in pay growth reflected in part a "near unwinding of distortions from the furlough scheme and base effects. This means average pay fell in real terms, an unwelcome development which is likely to worsen over the next few months."

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