LONDON (BLOOMBERG) - British companies stepped up hiring last month as coronavirus lockdown rules eased, delivering the biggest surge in payrolls on record.

The number of employees on company books swelled by 197,000 last month from April, the Office for National Statistics (ONS) said on Tuesday (June 15). In the three months to April, the jobless rate fell to 4.7 per cent, the lowest since last summer, as the number of people in work rose by 113,000.

The British labour market is faring far better than had been feared, with government wage subsidies preserving the jobs of millions of workers idled during more than a year of restrictions that plunged the country into its deepest recession in three centuries.

The economy is now recovering strongly as those curbs are lifted. In April, non-essential stores welcomed back customers and restaurants and cinemas followed suit last month, leading to a surge in demand for staff. Payrolls remain 553,000 below where they were in February last year before the pandemic hit Britain.

The question now is how big a blow the labour market will suffer from a government decision to extend lockdown rules that it had planned to ease next Monday.

On Monday, Prime Minister Boris Johnson announced that social distancing rules will remain in place for an extra four weeks until July 19 due to a surge in cases of the highly transmissible Covid-19 variant first detected in India.

That is a setback for nightclubs, theatres, concert halls and sports stadiums that have been closed or operating under tight controls during the pandemic. Almost 3½ million Britons remained on furlough as at the end of April.

The Bank of England expects unemployment to peak at 5.4 per cent, implying that far fewer people than previously thought will lose their jobs when support for furloughed workers comes to an end in September. That forecast was based on the economy fully reopening next week.

Wages surged 5.6 per cent in the quarter through April, the fastest pace since 2007. That was boosted by a base effect from a year ago.

Recent data were inflated by the loss of lower-paying jobs and the ONS estimated the underlying rate of growth is about 3 per cent

Claims for jobless benefits fell 92,400 in May, after a revised 55,800 drop the month before.

Vacancies jumped 16 per cent to 881,000 last month, their highest level since the pandemic started. Vacancies in the quarter to May climbed 24 per cent.

The redundancy rate in the quarter to April fell to pre-pandemic levels.