UK unemployment rate has dropped significantly and stands at pre-pandemic level at the start of the year. Office of National Statistics reported that the average unemployment rate is 3.8% during the three months to February. Currently, there is at least one vacancy for every unemployed person. This feat is achieved for the first time since early 2000’s.
High Inflation in UK
United Kingdom is witnessing high inflation like most other countries. The living standard is down as earnings have failed to comply with the pace of inflation. Unsurprisingly, wage growth is running faster than pre-pandemic times. However, the volume of workforce is still lower than it was prior to COVID-19 calamity. UK employers added 1.29 million jobs during the first three months of the year. However, the employment rate was unchanged at 75.5 per cent in the three months to February which is well short of pre-pandemic level.
Workers are reluctant to get back to work
A large number of potential workforce is not willing to get back to work. The inactivity rate rose to 21.4% percent which is 0.2 points higher. The people stated that they were looking after family or home, had retired, or had long-term sickness. The figures highlight the difficult trade-off for monetary policymakers. Workers are facing a tight labor market where they are getting higher wages but they are finding is tough to cope up with inflationary pressures.
Increase salaries amid inflationary pressures
The unemployment rate in the UK has not gone down below 3.8% since 1974. The UK labor market has witnessed increased churn in the jobs market as both hiring demand and workers’ desire to move roles surged last summer. Office of National Statistics reported that average weekly earnings excluding bonuses had picked up to 4 per cent in the three months to February. However, it noted that this was artificially boosted by the large numbers who had been furloughed on 80% pay a year earlier. Moreover, there are little chances that wage growth will fall back materially in the short-term.
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