UK employment rises yet remains below pre-pandemic level

The UK labour market turned a corner in the first quarter of 2021, with payrolled employment rising, unemployment edging down and hiring accelerating in the run-up to the economy reopening.

The unemployment rate averaged 4.8 per cent between January and March, down from 5.1 per cent in the previous quarter, the Office for National Statistics said on Tuesday.

The employment rate rose by percentage points to 75.2 per cent, but remained 1.4 percentage points below its pre-pandemic level.

Data from HM Revenue & Customs showed that the number of payrolled employees increased for a fifth consecutive month in April, although it remains 772,000 below pre-pandemic levels, with job losses concentrated among young people. The redundancy rate has also fallen from the high reached last autumn, although it is still running above its pre-pandemic rate.

The ONS said both the unemployment rate and the employment rate of young people had fallen over the past quarter, suggesting that they were staying in education without looking for work.

“The jobs market is standing firm,” said Tej Parikh, chief economist at the Institute of Directors. Although further job losses were likely as the furlough scheme unwound, they would be offset by new hiring as businesses scaled up their operations, he added. He also called for the government to bolster its retraining initiatives to help plug skills shortages.

There are few signs of labour shortages driving up pay growth to unsustainable levels. The ONS said underlying annual growth in total pay — after adjusting for the big fall in the number of low paid jobs — averaged around 2.5 per cent in January to March, while regular pay, excluding bonuses, grew more strongly by 3 per cent.