Road to recovery will not immediately tame the UK’s ravenous job market

After almost two years since the onset of the pandemic, it appears that unemployment is beginning to normalise.

Unemployment across Scotland was 3.6 per cent in the three months to the end of November 21. That is 0.8 percentage point reduction on the three months before, but more importantly it is lower than the 3.8% back in November 2019.

Just last month I questioned whether Omicron would burst our Christmas bubble. Job vacancies across Scotland had been growing despite the impending traditional festive slowdown, but with a fresh batch of restrictions looming one could have been forgiven for being slightly anxious about the Omicron impact.

With Christmas at our backs and our feet firmly planted in 2022 it is clear that Omicron’s severity on jobs and health is looking less severe than previous Covid variants.

The number of jobs advertised across Scotland during December stood at more than 42,000. That is 65% more than a year earlier and well ahead of the 35,000 that were advertise in December 2019, before the emergence of Covid.

With health-related restrictions on economic activity now set to be all but eliminated, we should be optimistic in our outlook for 2022. However, the new year does not come without challenges.

For one thing, Covid is not gone – it has merely become something that we now have some sense of control over. Beyond that we have cost and supply chain pressures including rising labour costs that are being passed on to customers.

The nature of our current economy saw a build-up in inflationary pressures over the second half of 2021. In November almost 45% of business reported the price or materials, goods or services bought in had increased, even when compared to normal price fluctuations.

Inflation reached 5.1% in November, the highest level in more than a decade, and likely to keep climbing well into 2022. The Bank of England are expecting inflation to peak at 6% in the first half of this year.

The furlough scheme which was acting as a “life support” to the labour market for 18 months came to an end in September. The phased nature of its withdrawal and the reopening of the economy means there has been minimal impact on unemployment.

So the reality is this: we have shortages in the labour market with unprecedented levels of demand which is pushing up wages. But in turn these cost pressures – mainly wages and supply chain – are mitigating the economic upside of the ravenous jobs market.

These obstacles mean we will likely see a multi-speed recovery throughout the year. We are unequivocally on the road to recovery which is a very good thing, but the journey will not be a smooth one.

Gavin Mochan is commercial director of s1jobs.