British employers added a record 184,000 staff to their payrolls in December, showing little impact from the Omicron variant of coronavirus, while job vacancies hit a new record high, potentially fuelling the Bank of England's inflation worries.
The broader unemployment rate for the three months to the end of November fell to 4.1%, the Office for National Statistics said today.
This was below economists' forecasts in a Reuters poll for it to hold at 4.2% and its lowest since June 2020.
"Today's figures are proof that the jobs market is thriving, with employee numbers rising to record levels, and redundancy notifications at their lowest levels since 2006 in December," British finance minister Rishi Sunak said.
Concern about possible labour shortages and pay pressures over the medium term was a major reason why the Bank of England raised interest rates last month for the first time since the start of the pandemic.
Financial markets see a greater than 80% chance that the Bank of England will raise rates again on February 3 after its next meeting.
Britain's job market performed more strongly than the Bank of England expected late last year.
Unemployment fell despite the end of a government job subsidy programme which was supporting more than 1 million workers in September.
More recently, a surge of Covid-19 cases linked to the Omicron variant of coronavirus has caused widespread staff absence and hammered demand in the hospitality sector.
But most economists expect the ill-effects to be short-lived.
Today's data showed that average earnings in the three months to November were 4.2% higher than a year earlier - in line with economists' forecasts - while job vacancies in the three months to December hit a record 1.247 million.
The ONS said it believed temporary factors which had distorted pay growth higher earlier in 2021 had now largely dissipated.
In nominal terms, pay growth is well above the 2-3% range seen before the pandemic, and a potential inflation concern for the Bank of England given weak underlying productivity growth.
But fast-rising inflation is eroding the benefit of higher pay for workers. Pay excluding bonuses was flat in inflation-adjusted terms in the three months to November, its weakest performance since July 2020.
"Few businesses appear to be hiking wages substantially in order to retain their staff," said Pantheon Macroeconomics's Samuel Tombs, who forecasts pay growth of 3.5% for 2022, well below his expectation of near 5% inflation.