Job vacancies surged to a new record high last month as increasingly desperate businesses scrambled to hire more than 1.1m workers.
Shortages are biting across the economy with more healthcare, leisure, transport and construction jobs on offer than ever before, according to the Office for National Statistics.
Retail vacancies are back up to pre-Covid levels and manufacturers are seeking more workers than at any point in the past 20 years.
It comes as Ocado said it would spend as much as £5m extra on higher pay and sign-on bonuses for lorry drivers. The move follows Tesco’s similar golden hellos to truckers and Amazon’s offers of bonuses to warehouse workers .
Costa Coffee is serving up 5pc pay rises to attract more workers, while the NHS is offering 3pc raises as Britain seeks another 181,000 healthcare staff.
Overall average pay surged by 8.3pc on the year, though this is in part due to distortions from job losses and furlough 12 months earlier. The ONS estimates that the “underlying” rate of pay growth is between 3.6pc and 5.1pc, still unusually high by the standards of recent years.
Payroll employment, which measures workers via the PAYE tax system and therefore excludes large groups such as the self-employed, rose to 29.1m in August, taking the total above pre-Covid levels for the first time.
The unemployment rate dropped to 4.6pc, down from the peak of 5.2pc at the end of last year but still up from 4pc when Covid began. It amounts to 1.55m jobseekers – far lower than feared when the crisis first struck and millions more were expected to be left out of work.
However, overall employment at 32.4m in the three months to July is still more than 700,000 below its level in the three months to February 2020.
The data indicates the economy is rapidly creating jobs for those out of work, as well as for those coming off taxpayer-funded furlough. There were still 820,000 fully furloughed jobs at the end of July, as well are more than 740,000 people who were being kept on furlough part of the time. Some furloughed workers may need to find new jobs when the Coronavirus Job Retention Scheme closes at the end of this month.
However, redundancy levels remain low by historical standards at 3.4 people per thousand employees in the three months to July, indicating that few employers are letting go of their furloughed staff.
The number of vacancies underlines the problems for employers as they try to expand to benefit from the rebounding economy.
Tony Wilson, director of the Institute for Employment Studies, said the overall number of people active in the jobs market has fallen by the largest amount since the 1990s. Around 6m people are outside the labour market because they are suffering from ill health, are caring for others or studying, or because they have taken early retirement.
Mr Wilson said: "With vacancies setting new records, the biggest risk that we're now facing is not enough workers rather than not enough jobs."
A total of 2.45m people said they are studying and so not working or looking for work – up by more than 300,000 since the pandemic began in a sign that many young people decided to sit out the crisis at university.
The number of under-65s declaring themselves to be retired rose by 91,000 to 1.2m.
Britain’s red-hot labour market poses a headache for the Bank of England. Prices are already rising by more than Threadneedle Street’s 2pc target and rising wages are likely to push prices higher still. The ordinary response would be to raise interest rates, but the economy is not yet back to its pre-Covid size and higher borrowing costs could wreak havoc.
Thomas Pugh, an economist at RSM UK, said: "There is clearly a risk that the prospect of large pay rises in some industries spooks the [Bank] into tightening monetary policy in the first half of next year, before the economy has properly recovered from the pandemic.”
Meanwhile US consumer prices rose less than forecast in August, ending several months of chunky gains and indicating cost pressure may be beginning to wane.
The US consumer price index rose 0.3pc compared to July, the smallest rise for seven months, leaving prices 5.3pc higher than a year ago. Economists polled by Bloomberg had expected a 0.4pc increase over the month. The rise was exaggerated by a comparison with price slowdowns at the onset of the pandemic last year.
Core inflation, which strips out the volatile components of energy and food, rose just 0.1pc.
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