The latest ONS figures show that unemployment is down and vacancies are at a record high as businesses struggle to recruit the staff they need.
Employment figures for October-December 2021, published this week by the Office for National Statistics (ONS), show that unemployment is down and job vacancies are up while UK wage growth is lagging behind the rising cost of living.
Business groups have warned that the tight labour market is causing a hiring crisis, with Jonathan Boys, labour market economist for the Chartered Institute of Personnel and Development (CIPD), saying that "employers will have to work even harder in 2022 to both find and keep staff as vacancies remain at record levels and more workers take advantage of a job-seeker friendly market to find a new and better job."
The latest ONS figures show that employee pay, excluding bonuses, grew by 3.7% in the three months to December 2021. However, inflation is up by 5.4% in the 12 months to December and real wages fell by 0.8% from a year earlier. The Bank of England has warned that inflation could rise above 7% this year.
According to the CIPD, the challenge for businesses is that there are fewer candidates available as unemployment continues to edge down while employment edges up. It seems that a significant number of people have left the workforce altogether during the pandemic, notably the over-50s and those suffering from long-term illness.
The CIPD's Jonathan Boys said: "There is no doubt many employers will be under more pressure to raise wages this year as they face the twin pressures of helping workers deal with the rising cost of living and further tightening of the labour market."
Commenting on the ONS data, Suren Thiru, head of economics at the British Chambers of Commerce (BCC), said: "Record vacancies underscore the critical hiring crisis facing firms. With high economic inactivity indicating that many people have left the jobs market altogether, chronic staff shortages are likely to weigh on the UK economy for a sustained period.
"With regular pay growth slowing, inflation is comfortably outpacing wages, weakening household finances further. Despite recruitment difficulties, the damage being done to business cashflow from a myriad of cost pressures is limiting the extent to which wages can rise."
He added: "The government must do more to help people access rapid retraining opportunities for in-demand jobs, including helping older workers to pivot to more sustainable jobs. Delaying the looming National Insurance rise would give firms the financial headroom to retain and recruit people."
Written by Rachel Miller.