Unemployment falls to lowest rate since 1974

UK unemployment has fallen to the lowest rate since 1974, according to the Office of National Statistics (ONS).

The level of people out of work has been on a general decline since late 2013, until the Covid-19 pandemic, which saw it rise until the end of 2020.

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However, unemployment has since returned to pre-Covid levels, with the last three-month period seeing the rate fall to its lowest figure since May to July 1974.

The latest three-month term saw the number of people unemployed for up to six months hit a record low, while the level of those unemployed between six and 12 months grew.

The figure for those unemployed for over 12 months continued to decrease.

A major driver behind the decrease in unemployment was linked to a 21.7% rise in the economically inactive, meaning those no longer looking for work.

Difficulties ahead

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However, analysts warned the promising figures hid approaching strain on the jobs market.

Energy bills this winter will see many smaller businesses placed under immense strain, with employers set to face difficult decisions between recruitment levels and spiking heating and electricity costs.

“Some companies are freezing recruitment and smaller businesses in particular have been having to make tough decisions about staffing levels as they considered soaring energy bills,” said AJ Bell financial analyst Danni Hewson.

“Government intervention should help allay some fears, giving business owners a little breathing space, though six months will disappear in the blink of an eye and makes it difficult to plan for the future.”

Meanwhile, inflation has climbed into the double digits and is currently on track to hit 13% in October, according to the Bank of England. However, more pessimistic predictions from Citibank cite levels as high as 18%.

Real terms pay has fallen dramatically over the last year, and employers will struggle to pay staff their essential salaries along with all other heavy expenses.

“[Recruitment] is still tricky. With one vacancy for every person unemployed competition is still fierce and pay is often the ultimate bargaining tool. But despite the fact wages have been rising with regular pay up 5.2%, work simply isn’t paying enough,” said Hewson.

“Inflation is merciless and in real terms pay fell by 2.8%, a slower rate than the previous month but it just shows the strain on pay packets and reinforces the differences between the public and private sector.”

The headline figures display good news on the employment market, however it’s possible celebration might be short lived as winter reaches UK shores. It remains to be seen how businesses will weather the cold seasons ahead.

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