Reasons to be cheerfully anxious as latest labour figures are released

ITV News Business and Economics Editor Joel Hills explains what the Chancellor can do to lessen the blow of Tuesday's figures

Company payrolls are groaning under the weight of employees, the redundancy rate has slipped to a new low. Few would have dared to predict these things a year, they are statistics to celebrate. 

The concern is that “economic activity” remains so high. Overall, employment remains below pre-Covid levels because well over 400,000 people appear to have decided they are no longer available for work. 

The data shows this in an issue for the over 50s in particular and suggests that a rise in long-term sickness may be the primary factor.

This has implications for employers. There is an abundance of vacancies in every region of the UK, in every sector of the economy and yet a significant minority of firms report recruitment problems. 

A diminished domestic labour pool coupled with stricter immigration rules, post-Brexit, is a potent cocktail and not necessarily one you’d choose to order.

But the real sting in tail is the squeeze on living standards that has begun. Households and businesses have been feeling it for several months, it is now showing-up in the official statistics.

Despite the difficulties some companies are having finding staff, prices are rising faster than wages.

Pay growth fell in November, the headline rate of inflation (CPI) rose. As a result, real average weekly earnings fell by 1%.

The hit to disposable incomes will intensify before it eases.

Inflation - currently 5.1% - is forecast to clear 6% by April when OFGEM’s energy price cap rises again and with it energy bills.

Cornwall Insight calculates that the average household dual fuel bill, currently £1278.00, will hit £1924.30 in April and is on course to reach £2255.09 by October.

That’s a stretch for those on middle-incomes and completely beyond the ability of the poorest to absorb. 

The chancellor sees Tuesday's labour market numbers as “proof that the jobs market is thriving” and it’s very hard to disagree. But he also know that many who are in work are feeling worse off and that disposable incomes are set to be cut further, not least when the tax rise he announced last year to support the NHS and social care take effect.

The question is what, if anything, Rishi Sunak plans to do about it. 

As for the Bank of England, unemployment is falling faster than it predicted, the labour market looks tight and inflation is running hot. There a strong case for raising interest rates again in February.