Employers added a record 241,000 staff to their payrolls last month, taking the total number of payrolled employees to 29.1 million, above the level recorded in February 2020 just before the UK went into the first Covid-19 lockdown.
The official figures showed the continued recovery in Britain’s job market as the government phases out the furlough support scheme, which finishes at the end of the month.
However, the Office for National Statistics (ONS) warned that the recovery in the jobs market remained uneven with the numbers of workers in hard-hit areas such as London and sectors including hospitality well below pre-pandemic levels.
The data also showed that the unemployment rate fell to 4.6 per cent in the three months to July, down from 4.7 per cent and in line with economists’ expectations.
The number of job vacancies in June to August 2021 was 1.03 million, the ONS reported, the first time vacancies have risen over 1 million since records began in 2001.
Average weekly earnings, excluding bonuses, rose by 6.8 per cent year-on-year in the three months from May to July, but the ONS said this was distorted by the pandemic and furlough-related and said the underlying rate was probably 3.6 per cent to 5.1 per cent.
July marked the peak of the so-called pingdemic when hundreds of thousands of staff had to self-isolate after being alerted by the NHS app that they had been in contact with people who had tested positive for Covid-19.
Rishi Sunak, the chancellor, said the statistics “show that our plan for jobs is working”, with the unemployment rate having fallen for seven months in a row and fewer potential redundancies notified in August than at any point since the start of last year.
However, Ruth Gregory, senior UK economist at Capital Economics, said the figures would “fuel concerns that labour market conditions are becoming too tight”.
She said: “The latest data brought more signs that labour market slack is declining fast and that labour shortages are contributing to faster underlying pay growth.”
She said the shortages should prove temporary, but the “danger is that they persist for longer than we expect, causing inflation to stay high and the Bank of England to pull the interest rate trigger next year.”
Gregory added that the surge in job vacancies above one million was 27.5 per cent above their pre-crisis level and suggested that labour shortages were still intensifying. “This will put further upward pressure on wages,” she said.
Kitty Ussher, chief economist at the Institute of Directors, said the economy was “well-prepared for the end of furlough, with unemployment demonstrating a clear downward trend and the highest level of vacancies in the economy since records began”.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, cautioned that about 60 per cent of staff on furlough were attached to small businesses employing fewer than 20 people, “who are unlikely to have the financial strength to re-employ them for all their pre-Covid hours”.
“And while job vacancies rose to a new record high in August, vacancies are skewed towards different industries to those which have used the furlough scheme the most, pointing to a need for people to retrain before they are re-employed,” he added.
“As things stand, then, we expect the unemployment rate to rise to about 5 per cent in the fourth quarter, from 4.5 per cent in the third quarter, and for many furloughed staff that cling on to their jobs to receive fewer hours than they desire.”