The UK unemployment rate fell back to pre-pandemic levels in early 2022, but the tightening in living standards intensified, with incomes failing to keep pace with pay despite record job vacancies.

The unemployment rate averaged 3.8 percent in the three months to February, back to its lowest point in 2019, the Office for National Statistics said on Tuesday.

But the workforce is still smaller than it was before the pandemic. While the number of job vacancies rose to a new high of 1.29 million in the three months to March — four vacancies for every 100 jobs — the employment rate held at 75.5 in the three months to February % unchanged and well below pre-pandemic levels.

That’s because more people are choosing not to work: The inactivity rate rose 0.2 percentage points to 21.4%, as people said they were caring for a family or family, were retired, or had a long-term illness.

The figures underscore the difficult trade-offs facing monetary policymakers as they face a tight labor market and wage growth is picking up but still can’t keep pace with rising prices.

The ONS said average weekly earnings excluding bonuses rose 4% in the three months to February – although it noted that this was due to sacks a year ago for paying 80% of wages A large number of employees are artificially driven. .

Thomas Pugh, economist at RSM UK, said the figures would “give the MPC more concerned that the recent burst of high inflation is starting to be reflected in wages” and would give the MPC “all the reasons it needs” to raise interest rates again in May.

However, even with the furlough distortion, the spike in inflation meant fixed income actually fell 1% over the past year, the biggest drop since 2013. Total pay growth of 5.4 per cent was still just above inflation, the ONS said, because of the generous bonuses.

“The soaring inflation has cast a huge shadow over an otherwise buoyant labor market,” said Nye Cominetti, senior economist at the Resolution Foundation think-tank. He noted that real wages for public sector workers have fallen more sharply, a gap that will make Future periods of public sector wage caps are “more challenging”.

Suren Thiru, head of economics at the British Chambers of Commerce, said the figures underscored “the historic hiring crunch faced by companies”. But he also warned that labor market conditions could soon weaken if soaring inflation and rising tax burdens “stifle” consumer spending, while also limiting companies’ ability to hire and raise wages.

Investec economist Ellie Henderson said despite the “substantial” number of vacancies, “hiring confidence could rise quickly if a high inflation environment causes households to cut spending while businesses grapple with rising costs. weakened”.

Chancellor of the Exchequer Rishi Sunak said the figures showed “continued strength in the job market”, adding that the government was providing £22bn of support to “buffer the impact of rising global prices on the cost of living”.

But the evidence of deterioration Squeeze living standards There will be increased pressure on governments to do more to boost household incomes.

Union Congress secretary Frances O’Grady said the increasingly difficult situation was a “political choice” and called on the chancellor to immediately raise minimum wages, pensions and benefits.

Tony Wilson, director of the Employment Institute, said the “triple hit” of falling wages, more job losses and a labour shortage would add to the pressure on living standards as inflation rose over the summer, with vacant jobs hampering the economy growth and could drive up costs. He called for “urgent action” to protect incomes and get more people back to work.