Soaring bonuses for City bankers and high signing-on fees for construction and IT professionals pushed Britons’ average annual pay up by 7% in March, but most workers suffered a fifth consecutive month of falling living standards.
Without bonus payments, workers were paid an average 4.2% wage increase in the three months to March, well below the 7% inflation rate recorded in the same month, according to the Office for National Statistics.
Analysts said the UK was suffering a chronic shortage of workers after about 500,000 quit the labour market during the Covid-19 pandemic and many continental European workers left Britain following Brexit. The unemployment rate fell to 3.7%, the lowest since 1974.
Paul Dales, the chief City economist at the consultancy Capital Economics, said: “Anecdotal evidence suggests that businesses have been raising bonuses to maintain staff, so it is probably another sign of how the tight labour market is feeding into faster wage growth.”
Illustrating the widening gap between the number of staff employers need and those seeking work or to move job, vacancies rose to a record of 1,295,000 in the three months between February and April – an increase of 33,700 from the previous quarter and a jump of almost 500,000 since March 2020.
For the first time since records began, the number of people out of work was higher than the level of vacancies after a 0.3% percentage point fall in the unemployment rate to 3.7%.
Tony Wilson, the head of the Institute for Employment Studies, said there was an urgent need for the government to support workers back into jobs.
Darren Morgan, the director of economic statistics at the ONS, said there was a rise in the number of people leaving unemployment to take up jobs and many people who had quit the labour market had returned to seek work, but it fell short of the number of people employers needed.
About 83,000 workers rejoined the jobs market in March, up from 10,000 in February and a consensus forecast by City economists of a meagre 5,000 increase.
“Since the start of the pandemic, around half a million more people have completely disengaged from the labour market,” Morgan said. “However, job vacancies are still rising, reaching yet another record high.
“Indeed, with the latest fall in unemployment, to its lowest rate since 1974, there were actually fewer unemployed people than job vacancies for the first time since records began.
“Continued strong bonuses in some sectors such as construction and especially finance mean that total pay is continuing to grow faster than prices on average, but underlying regular earnings are now falling sharply in real terms.”
Responding to to the latest figures, the chancellor, Rishi Sunak, said: “I understand that these are anxious times for people, but it’s reassuring that fewer people are out of work than was previously feared, and we are helping them to keep more of their hard-earned money through tax cuts, changes to universal credit and support with household bills worth £22bn this financial year.”