Employment rises to near pre-pandemic levels as experts warn of continuing labour shortages

Latest ONS figures show that recovery among part-time roles and under-25s is driving jobs growth

An increase in part-time workers has fuelled a further drop in unemployment, the latest official figures have shown, as experts warn of continued labour shortages.

The latest data from the Office for National Statistics (ONS) estimated the UK employment rate to be at 75.5 per cent between August and October this year: 0.2 percentage points higher than the previous quarter and just 1.1 percentage point lower than pre-pandemic levels.

As of November there were 29.4 million payrolled employees, up 257,000 compared to October and 424,000 more than February 2020 – before the first coronavirus restrictions hit.

The number of job vacancies in the three months to November also continued to rise to a new record of 1,219,000, up 434,500 from the pre-coronavirus levels.

The ONS said the increase in employment was largely driven by the growth in part-time workers and young people aged 15 to 24 years, both groups that saw employment fall during the pandemic but were now recovering.

And while the ONS warned redundancies made after the furlough scheme ended in September might not yet be reflected in the figures, it said that conversations with employers suggested redundancies made up only a small proportion of those still on the scheme when it closed.

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Jonathan Boys, labour market economist for the CIPD, said the labour market now looked much like it did pre-pandemic – meaning it was once again a tight market. This was feeding into wage growth, he said, noting that average pay growth was strong at 4.3 per cent. “CIPD research shows raising wages is employers’ top response to hard-to-fill vacancies,” he said.

But, Boys said, not all employers had the scope to increase pay, meaning many were feeling the bite of recruitment and retention challenges. “Against this backdrop of a job-seeker-friendly labour market, it is important that more employers take steps to advertise jobs as flexible so they can attract older workers, people with caring responsibilities or those with long-term health conditions who are willing and able to work,” he said.

Boys also warned that the “spectre” of the Omicron variant still loomed. “In recent months we have seen unambiguous recovery, but that could slow down or even reverse if restrictions and behaviour change place limits on economic activity,” he said, noting that this would be a particular concern for consumer-facing sectors including hospitality, which was currently seeing a record number of vacancies.

However, James Reed, chairman of Reed, was more positive about how the labour market would weather the new variant. “There’s been plenty of talk from doomsayers that the Omicron variant will plunge us back into economic despair, but the outlook appears much more optimistic now compared with the first Covid wave we faced in March 2020,” he said.

Commenting on the figures, Tania Bowers, global public policy director at the Association of Professional Staffing Companies (APSCo) said the uptick in employment was positive, but added to the preexisting talent shortages.

“The country is facing a significant dearth of talent in a post-Brexit, Covid-hit environment – and the current make-up of the immigration system doesn’t enable the creation of a dynamic and flexible workforce to the extent that is needed,” she said.

“There is currently no viable visa route into the UK for highly-skilled independent professionals. Without this, the UK will continue to face significant staff shortages that could hinder economic growth.”