Last reviewed 19 April 2022

The latest labour market figures published by the Office for National Statistics (ONS) show that vacancies have reached a record high with unemployment falling to 3.8% — matching its lowest level since December 1974.

Various industry groups have pointed out, however, that the underlying figures paint a more worrying picture with the Food and Drink Federation (FDF), for example, highlighting that the headline figures mask a persistent decline in labour force participation, with, compared with the period pre-pandemic, half a million fewer people in work (507,000) and another 487,000 out of work but not looking for employment.

British Chambers of Commerce (BCC) Head of Economics, Suren Thiru, said: “Increasing vacancies highlights the historic hiring crunch facing firms. With rising economic inactivity confirming that lots of workers have seemingly quit the jobs market completely, severe staff shortages may remain a persistent drag anchor on economic activity.”

Neil Carberry, Chief Executive of the REC (Recruitment and Employment Confederation), agreed that finding ways to tempt some of the missing thousands back into work will be very important in the coming months.

He also noted that, while regular pay grew by 4% on average over the past year, which would normally be a healthy amount, it still lags well behind inflation. This was a point picked up by the Resolution Foundation which agreed that a buoyant labour market is not generating much wage pressure.

“And with inflation soaring,” the independent think tank said, “Britain’s pay squeeze will continue to tighten. The current fall in real wages is not projected to end until late 2023, and will leave average wages no higher than in 2007.”

The Chartered Institute of Personnel and Development (CIPD) agrees that the big pay squeeze is still to come with regular pay now about where it was in September 2020.

Its labour market economist, Jonathan Boys, also pointed to a gap emerging between public sector and private sector pay with regular pay (excluding bonuses) in the former having grown at 4.7% compared to 1.7% in the public sector in the year to February 2022.

Comment by Kate Palmer, HR Advice and Consultancy Director at Peninsula

Small businesses in particular will feel the impacts of increased outgoings. This comes at a time where employee salaries are already higher than ever, to attract new talent in the midst of “The Great Resignation.”

Those without extensive resources risk losing key people to competitors who are able to offer attractive remuneration and benefits packages.

Employers are under no obligation to increase salaries, especially when they don’t have the practical means of doing so, but may want to consider other ways they can appeal to employees who are also feeling the pinch of increased living costs.

Flexible working arrangements and enhanced holiday entitlements can be a great way to continually engage and satisfy staff in times of financial turmoil. It’s understandable that when financial pressures mount, individuals experience other symptoms of stress, anxiety and depression.

Therefore, it’s imperative to provide adequate support for an employee’s mental health and emotional wellbeing.