Live news: UK labour shortage worsens but average earnings start to slide

The UK’s labour shortage worsened at the end of 2021, with vacancies climbing to a record, but average earnings began to fall as inflation outstripped growth in pay.

Official data published on Tuesday showed unemployment fell to 4.1 per cent in the three months to November, 0.1 percentage point above its pre-pandemic rate.

The employment rate rose to 75.5 per cent, but remains 1.1 percentage points below its pre-crisis rate — due to a rise in inactivity that the Office for National Statistics said was driven by older workers dropping out of the labour force.

With employers struggling to recruit, the number of vacancies rose to a record of 1,247,000 in the three months to December — equivalent to four in every 100 employee jobs in the economy, with quarter of a million posts unfilled in health and social care alone.

There was little sign of any hit to employment in the early stages of the Omicron outbreak, with real-time data for December showing the number of payroll employees rising by 184,000.

But Tony Wilson, director of the Institute for Employment Studies, said the figures were “disappointing”, with inactivity rising despite unprecedented demand for staff.

While staff scarcity has driven faster wage growth in some sectors, the ONS said average earnings were falling in real terms, with inflation outpacing pay gains.

Its headline measure of growth in average weekly earnings, excluding bonuses, was 3.8 per cent for the three months to November — leaving earnings flat in real terms over the same period, and down 1 per cent in November alone.