Britain’s unemployment rate reached 3.6% in the three months to July 2022. This figure was down 0.2 percentage points on the previous quarter and represents the lowest rate since 1974.

While a low rate of joblessness might sound positive, closer inspection of the figures shows that the drop in unemployment has more to do with people leaving the workforce than people gaining employment.

An increase in the number of people who said they were not working because they were studying or had a long-term health condition helped take the economic inactivity rate up 0.4 percentage points to 21.7% - well above pre-pandemic levels.

It’s not clear what the low unemployment rate means for contractors.

Miles Grady said: “Most people assume that low unemployment is good news for contractors.

“If most people have jobs, it means that recruiters can have a harder time filling positions, which gives more opportunities for contractors to step in and fill gaps.

“A shortage of applicants can also help drive contractor rates up, but these positives are only half the story.

“Many contractors are being paid more, but high inflation disproportionately affects contractors that drive long distances or use larger amounts of energy as part of their work.

“The number of new job vacancies is also slowing down, which is a key sign of economic slow down.

“Low unemployment might be a good thing for contractors in the short term, but recession could burn everyone’s toes.”

Data from the Office for National Statistics showed that wages excluding bonuses increased by 5.2% in the three months to July. With soaring inflation however, most workers have seen their total pay decrease 2.6% in real terms, with regular weekly earnings down 2.8%.

The number of job vacancies fell by the most in two years, down 34,000.

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