UK unemployment fell to its lowest rate in nearly half a century in the first quarter of 2022, as the number of job vacancies rose to a new high of 1.3mn, according to official data released on Tuesday.
The buoyant labour market figures underscored the scale of the challenge facing the Bank of England as it tries to rein in surging inflation, with workers seeking wage rises amid the cost of living crisis.
BoE governor Andrew Bailey meanwhile provoked fresh criticism from Conservative MPs after saying he was unable to stop UK inflation hitting 10 per cent this year and admitting sounding “apocalyptic” on rising food prices.
Official data due on Wednesday are expected to show that inflation climbed above 9 per cent in April, driven by an increase in regulated energy prices. Consumer price inflation stood at a 30-year high of 7 per cent in March.
Analysts said the labour market data would strengthen the case for the BoE’s Monetary Policy Committee to raise its benchmark interest rate again next month.
The Office for National Statistics said the jobless rate stood at 3.7 per cent in the three months to March, the lowest level since 1974, with fewer people out of work than there were job openings for the first time on record.
The employment rate rose to 75.7 per cent, up 0.1 percentage points on the quarter.
“Even though the economy contracted in March and may be on the brink of a recession, jobs growth strengthened . . . and wage growth accelerated,” said Paul Dales at consultancy Capital Economics.
He added that the BoE would need to raise interest rates further than expected to quell inflationary pressures.
The ONS said annual growth in regular weekly earnings rose to 4.2 per cent in the three months to March, equivalent to a real terms fall of 1.2 per cent.
However, total pay including bonuses was still outpacing inflation, with annual growth of 7 per cent, or 1.4 per cent in real terms.
This overall growth masked big differences between the public and private sectors. Nominal total pay rose 10.7 per cent year on year in finance and business services, but just 1.4 per cent — equivalent to a big real terms fall — in the public sector.
Hannah Slaughter, an economist at the Resolution Foundation think-tank, said some people were taking advantage of a tight jobs market to move roles or secure retention bonuses.
On Monday, Bailey said the central bank could do little to prevent inflation rising into double digits by the autumn, while acknowledging that it had been slow to recognise the pressures building in a “very tight” labour market.
He also admitted sounding “apocalyptic” on food price rises and expressed concern that Ukraine, a big producer of wheat, could not export.
His choice of language on food price increases dismayed some senior Tory MPs who feared that it could alarm voters. Brandon Lewis, Northern Ireland secretary, told Sky News: “I was surprised to see that particular turn of phrase, I have to say.”
Former cabinet minister Liam Fox said he wondered whether Bailey was trying to distract from “the failure of the bank to achieve the monetary stability which is its primary responsibility”.
Chancellor Rishi Sunak defended the BoE, telling MPs that “its record speaks for itself”. He said the average inflation rate in the central bank’s 25 years of operational independence was exactly 2 per cent, its official target.
Additional reporting by Nathalie Thomas