Employment growth in the UK reportedly returned to pre-pandemic levels last month, however the boom in jobs seems to be short-lived due to the impact of the Russia-Ukraine war and cost-of-living crisis, as per the report by BDO.
The business advisory firm has shown that British firms reported the fastest growth in the labor market since the pandemic in February 2020.
BDO’s index, which determines business sentiment among senior managers, went up for the fifth time in a row in March, a two-point rise from February, to approximately 112.74. For reference, anything above 95 is deemed as growth.
As per the report, manufacturing and services sector managers were most ardent at hiring new staff, with their optimism outweighing concerns over supply chain disruptions across the economy.
The firm’s findings are backed by the data from the Office for National Statistics, which showed a 3.9% decline in the country’s unemployment rate in the three months to January - the first time it dropped below pre-pandemic levels.
Kaley Crossthwaite, a partner at BDO, stated that the labor market showed resilience through the pandemic and continued growing with the gradual relaxation of restrictions.
Crossthwaite added that while it is assuring for the employment rate to return to pre-pandemic levels, it can easily subside due to rising inflation, cost of living crisis, as well as the geopolitical matters that are hindering business growth, which puts pressure on the employment index.
Independent UK thinktank, Resolution Foundation, which analyses living standards, stated that wage growth has surged due to a competitive labor market, with firms increasing their pay in order to attract and retain new staff.
But its economists are concerned that wage growth will be soon countered by increasing inflation and prices of energy, indicating that workers will not be able to feel the effects of the booming labor market.
Nye Cominetti, Senior Economist, Resolution Foundation, stated that with inflation expected to reach 8% in upcoming months, many workers’ earnings will drop in real terms, putting more pressure on living standards.