Ben Harrison, director of the Work Foundation think tank at Lancaster University, added that “while employment levels are stable, this masks that key indicators such as vacancies, wages and long-term sickness are stuck in reverse.”

The Work Foundation’s figures found that there are now 671,000 more people who are economically inactive due to long-term sickness since December to February 2020.

Harrison said: “If the UK government is to meet its intended 80% employment rate, it must act to address the high levels of long-term sickness that are keeping too many people out of the jobs market. Despite unemployment being at historically low levels, the UK has had over 2.7 million people out of the labour market due to long-term sickness since May – July 2023.

“The emphasis must be on de-risking remaining in and returning to work for those with long-term health conditions. That means strengthening the UK’s meagre statutory sick pay system that forces some to work while ill, boosting access to flexible working from day one of employment, and shifting the focus of the welfare system away from punitive sanctions and towards more tailored, long-term employment support,” he added.

Harrison warned any good news for the government in tackling unemployment front may well be short-lived.

He said: “Vacancies have decreased for the 28th consecutive month but remain 35,000 above pre-pandemic levels. With recent hikes to employer National Insurance contributions and the minimum wage soon to take effect, we could see further cooling of the jobs market as some employers will lack confidence to employ more people as their overheads rise.

“Wage growth is continuing to soften from the highs of 2023, but the UK is still in the midst of a 16-month period of positive real pay growth. However, this comes on the back of more than a decade of pay stagnation since the global financial crash in 2008, and with staff demand falling and inflation due to rise over the coming months, the good news may be short-lived.”

Neil Carberry, chief executive of The Recruitment and Employment Confederation, added: “Today’s labour market statistics confirm the cooling trend on pay and vacancies suggested by the business surveys. This shows that the Bank of England is right to go for a period of rate cuts as pay pressures have eased and growth needs to be the focus.

“Going for growth also means boosting business investment. Many businesses will be feeling bruised by the large increases to their employment costs in the budget and Employment Rights Bill. Getting growth going is what makes changes more affordable, that’s why firms will be looking for real change on industrial strategy, public service reform and skills.”

Carberry added that the government should “embrace” how “important flexible working is for workers and companies alike when things are uncertain”.

“Backing temporary workers matters to our economy – but most of all to the temps themselves,” he said.

Figures showing wage growth has slowed follow the announcement that around three million low-paid workers will be receiving a pay rise in April 2025, as chancellor Rachel Reeves confirmed the minimum wage for over-21s will increase to £12.21 an hour.

“It was the Labour government that introduced the national minimum wage in 1999. It had a transformative impact on the lives of working people,” Reeves said at the autumn budget on 30 October.

“[The new increases are] a Labour policy to protect working people, being delivered by a Labour government once again.”

Employees aged 18 to 20 and apprentices will also see their minimum hourly pay increase, from £8.60 to £10 and £6.40 to £7.55 respectively. Reeves added that over the coming years, minimum wages will “move towards a single adult rate, phased in over time”.

The new higher rate is still lower than the £12.60-an-hour standard calculated by the Living Wage Foundation, which is paid voluntarily by 15,000 UK employers.

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