The UK labour market continues to bounce back strongly. Today’s ONS data show positive developments across the board, with employment rising, unemployment falling and vacancies climbing to a record high. 

Payroll employment increased by over half a million in the three months to July, closing the gap to around 200,000 below pre-pandemic levels and recovering four-fifths of last year’s drop. Hospitality, leisure and retail were among the sectors leading the charge as the economy reopened. Meanwhile, July’s single-month vacancies figure topped one million for the first time ever. 

The end of furlough next month is a key milestone. The current strength of labour demand — along with the redundancy rate having dropped to pre-pandemic levels — has raised hopes that the labour market could pass this waypoint relatively unscathed. 

Though that may come to pass at the aggregate level, there will be some workers who won’t return to their old jobs. The pandemic has accelerated certain structural changes in the economy and resulting mismatches in skills and location mean some may find the transition back into work difficult. 

For employers struggling to hire, the challenge is how to tap into different talent pools than they may have previously relied on. With inactivity still over 350,000 higher than pre-pandemic, attracting some of those currently sitting on the sidelines back into the labour force will also be key.