SCOTLAND’S job numbers are improving but pay increases are trailing behind those in the rest of the UK, with rampant inflation adding to the squeeze, according to official figures.

Real pay has also fallen by the largest amount in almost a decade after taking into account the cost-of-living inflationary squeeze.

The Office for National Statistics said Scotland’s unemployment rate fell by 0.1 percentage points between December and February to 3.5%.

This was also down 0.2 percentage points from the same period two years ago, before the Covid pandemic.

Across the UK, the unemployment rate fell from 3.9 to 3.8%, its lowest level since 1974.

Total employment fell by 0.3 points to 74.7%, a drop of 0.6% since before the pandemic.

The UK rate was unchanged relative to the previous quarter at 75.5%. 

The number of people deemed “economically inactive” - those aged between 16 and 64 who are not working, not seeking to work or are unavailable to begin employment - was 22.5%, up 0.8 points since before the pandemic and 1.1 points higher than the rest of the UK.

Early estimates also suggest that median monthly pay for payrolled employees n Scotland fell slightly last month to £2,050, although it is still up 9.5% since the pandemic.

However media payrolled pay is up 11.1% across the UK over the same period.

Other ONS figures showed regular pay excluding bonuses tumbled 1.8% in the three months to February across the UK after taking soaring inflation into account, as measured by the Consumer Prices Index (CPI), the steepest fall since August to October 2013.

The ONS said real pay was now “falling noticeably”, with figures for February alone showing regular wages dropped 2.1% after inflation, the biggest drop since August 2013.

Under CPIH, which includes owner occupiers’ housing costs and is the ONS’s preferred measure of inflation, real regular wages fell 1% in the three months to February.

Although UK-wide pay rose 4% in the quarter, it was far outstripped by inflation, with experts warning wages will lag even further behind rising prices later in the year.

Chancellor Rishi Sunak said the Government was “helping to cushion the impacts of global price rises through more than £22 billion of support for the cost of living this financial year”.

But Labour hit out at the Government’s move to press ahead with this month’s tax rises.

Shadow chief secretary to the Treasury Pat McFadden said Mr Sunak has “decided to make Britain the only major economy to land working people with higher taxes in the midst of a cost-of-living crisis.”

HMRC PAYE figures indicated there were 2.41million payrolled employees in Scotland in March, up 21,000 or 0.9% since February 2020, compared to a UK-wide rise of 1.9%.

The experimental count of those claiming Jobseeker’s Allowance and Universal Credit primarily foe being unemployed was 126,700 in Scotland last month, up 15,600 (14.1%) since February 2020, but down 5,700 (4.3%) in a month.

The claimant count rate in March was 4.1%, compared to 4.3% for the UK as a whole.

SNP public finance minister Tom Arthur said: “For December to February 2022, Scotland’s estimated employment rate fell over the quarter to 74.7% while the estimated unemployment rate fell slightly to 3.5%.

“This latest time period reflects the emergence of the Omicron variant at the end of last year, when it was necessary to implement strict public health measures to curtail its spread.

“Separate HMRC early estimates show 2.41 million payrolled employees in Scotland in March 2022, 21,000 more than in February 2020, prior to the pandemic.

“While we continue to face economic challenges, with the rising cost of living, the negative effects of Brexit and the potential economic impacts of Russia’s illegal invasion of Ukraine, the Scottish Government remains committed to doing all we can to help our economy recover.

“The new National Strategy for Economic Transformation will help us build an economy of secure, sustainable and satisfying jobs. We are also investing an additional £68.3 million in employability and training to help businesses address skills shortages and help build a fairer, more prosperous economy for everyone.”

Mr  Sunak added: “Today’s stats show the continued strength of our jobs market, with the number of employees on payrolls rising once again in March and unemployment falling further below pre-pandemic levels.  

“We are helping to cushion the impacts of global price rises through over £22bn of support for the cost of living this financial year. We’re also helping people to find new jobs, and ensuring work always pays as this is the best way to support households in the longer term.”

The ONS data showed there were 86,000 fewer jobless Britons at 1.3 million in the quarter to February, while those in employment rose 10,000 to 32.5 million.

More timely PAYE figures showed another rise in the number of UK workers on payrolls last month, up by 35,000 between February and March to 29.6m.

But in a sign of easing demand for staff, this was the smallest monthly rise in a year. 

Vacancies also saw the smallest rise since February to April 2021, up 50,200, although they also hit another record high of 1.29 million in January to March.

The shrinking labour market has been driven by older workers choosing to retire early throughout the pandemic.

Inflation, already at 6.2%, is forecast to peak at nearly 9% this autumn.

Official data out tomorrow is set to show another steep rise in the CPI.

The UK’s economic forecasters, the Office for Budget Responsibility (OBR), recently warned that households will suffer the biggest fall in real incomes since records began in 1956, with a drop of more than 2.2% this year, thanks in part to colossal energy price rises.

Ellie Henderson at Investec Economics warns the jobs market may slow as a result.

“Although there is currently a vast amount of vacancies, hiring confidence can quickly be dented if the high inflationary environment results in households cutting back expenditure while firms struggle with rising costs,” she said.

Scottish Secretary Alister Jack said: “Today’s figures show how the resilience of the UK economy is benefitting every part of the country.  While we should continue to keep a close eye on the jobs market, Scotland’s unemployment rate is now down to where it was in February 2020 and more people are in paid employment than before the pandemic.

“As we level up opportunities right across the country, we’re taking steps to ensure everyone benefits from a thriving jobs market. Our Energy Security Strategy will help create over 40,000 more jobs in clean industries across the whole UK.

“Through our extensive jobcentre network, we’re working to match people with jobs in the sectors that need them most and providing tailored support to help even more Scots back into employment.”