UK jobs and payrolls hit record highs as staff shortages continue

File photo dated 17/02/16 of a Job Centre Plus in London. Britain saw a record 356,000 increase in the number of workers on payrolls last month and vacancies soared as the economy recovered, official figures have shown. Issue date: Thursday July 15, 2021.
The number of job vacancies reached 20-year highs between July and the end of last month. Photo: PA

UK employers added 207,000 staff to payrolls in September, with the number of job vacancies reaching 20-year highs between July and the end of last month.

Figures from the Office for National Statistics (ONS) showed on Tuesday that the unemployment rate had fallen for the eighth month in a row.

The headline, three-month average, unemployment rate fell to 4.5% in August, from 4.6% in July, matching the consensus.

The headline rate of year-over-year growth in average weekly earnings, including bonuses, fell to 7.2% in August, from 8.3% in July, but exceeded the consensus of 7.0%.

London saw the biggest bump in employment as the capital made up ground with the rest of the country after a large drop during the pandemic, but failed to reach pre-pandemic levels.

Although the numbers were strong, analysts said that the increase was not strong enough for the Bank of England (BoE) to bring an interest rate hike forward, or at least before it has assessed the post-furlough landscape in November.

"The economy remains a long way from reaching full employment, suggesting that the MPC [Monetary Policy Committee] will not need to rush through a series of interest rate hikes over the next 12 months to combat domestically-generated inflation," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

"The payroll employee data misrepresent the overall picture, due to the strong flow of people from self-employment to salaried roles."

In its most recent meeting, the BoE unanimously opted to keep interest rates at 0.1% and set its near-term inflation prediction at 4%.

Read more: Fuel crisis and bad weather hit UK retail rebound in September

“We remain committed to helping people find great work, with an extra £500m to support hundreds of thousands back into employment and help the lowest paid to progress in their careers,” said chancellor Rishi Sunak.

Meanwhile, the August figures contained plenty of good news for job seekers; there are early indications that the withdrawal of furlough at the end of September may not have sparked a rash of redundancies as feared.

The Insolvency Service found that just 200 companies planned to make more than 20 people redundant between September-November, which would put just 13,836 jobs at risk.

"But while it seems like we’re in the clear, we’re still not out of the woods just yet. We don’t yet know how many firms plan to lay off fewer than 20 people, given that businesses with fewer than 50 staff employ almost half of UK workers, that’s a massive unknown," said Sarah Coles, personal finance analyst at Hargreaves Lansdown.

"It‘s also still relatively early days for companies bringing people back from furlough."

Watch: What is inflation and why is it important?