The unemployment rate in the United Kingdom fell to 4.3% in the three months to the end of September, according to official data, as 160,000 people were added to payrolls.
The National Statistics Office reported that job vacancies reached 1.17 million in the three months to October, easing concerns about the end of the UK government’s furlough scheme.
Early figures show a record number of nearly 1.3 million vacancies in October, as businesses struggle to hire workers due to labor shortages.
The latest labor data, according to Chancellor of the Exchequer Rishi Sunak, is “testament to the extraordinary success of the furlough scheme” and confirms that the government’s jobs plan during the Covid-19 pandemic “worked.”
The UK economy slows dramatically in the third quarter as the Covid recovery falters.
“We understand how important it is to keep people in good jobs, both for them and for our economy – which is why it’s fantastic to see the unemployment rate fall for nine months in a row and record numbers of people entering the labor force,” Mr Sunak said.
Despite the UK government ending its furlough jobs support programme, which kept millions of private sector workers in their jobs during the Covid-19 crisis, in September, the unemployment rate fell by 0.2% from 4.3 percent in the three months to August.
There had been concerns that the scheme’s termination would result in a surge in unemployment, with an estimated 1.1 million people still on the program in its final days.
However, demand for workers has remained strong since the economy reopened fully in the summer, with employment gains particularly strong in sectors such as administration, hospitality, and healthcare.
“It may take a few months to see the full impact of the furlough ending, as people who lost their jobs at the end of September may still be receiving redundancy pay,” said Sam Beckett, the ONS’s head of economic statistics.
“However, an early estimate for October shows that the number of people on the payroll increased significantly from the previous month and is now well above its pre-pandemic level.”
The UK labor market’s strength strengthens the case for the Bank of England to raise interest rates as soon as next month.
The latest figures, according to Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, are “another layer in the economic jam sandwich, indicating that higher prices may prove a lot stickier than first thought.”
“Fears that a large number of furloughed employees would lose their jobs prompted the Bank of England to postpone an interest rate rise at their most recent meeting,” she explained.
“However, the job queues are shrinking as the fierce competition for workers continues… [and] Governor Andrew Bailey is concerned about rising inflation, and the jobs figures are another sign that a new sugar rush of higher wages is on the way.”
Payrolls were 235,000 higher than when the pandemic hit in February 2020, with underlying wage growth excluding bonuses ranging from 3.4% to 4.9% in the quarter through September, up from around 3% prior to the pandemic.
According to research group The Institute for Employment Studies, the pandemic has resulted in a 950,000 workforce shortage in the UK, defined as the difference between the number of people in the labor market now and what would have been expected based on pre-crisis trends.
Over half a million are older workers who have left the labor force. Up to one-third of that comes from lower migration, with the remainder coming from younger people who have gone to school.
While the UK’s job outlook remained positive over the summer, “ongoing supply chain issues, labor shortages, and record high vacancies have put a brake on growth,” according to Matthew Percival, director of people and skills at the Confederation of British Industry.
According to Ms Streeter, the supply chain crisis has already spread around the world, raising costs for businesses and showing no signs of abating.
“The pandemic rebound has buttered up demand for goods, and now the potential for higher wages to congeal has grown,” she said.
“The official Labour Force Survey will not be released until December 16, but if the jam sandwich of sticky prices shows no signs of easing, it looks increasingly likely that the Bank will raise rates at its meeting two days later.”