THE health of Britain’s labour market and pay-rise levels have been hugely overstated, a leading think tank will warn today.

Hours worked in the British economy remain at recession levels, and most vacancies are still relatively easy to fill, despite the focus on shortages in some sectors, the Resolution Foundation says.

Its survey of 8,000 workers found that four in five who were furloughed during the first and second lockdowns are back working, while vacancies are higher than pre-crisis levels.

But it also found that around 10 per cent of those who were self-employed before the crisis are no longer working.

The labour market is “lukewarm, not hot,” the foundation says, even as workers come off the government’s furlough scheme, which starts to be phased out from Thursday.

Official data “hugely overstates” the current level of pay rises, it says, with underlying annual wage growth at just over 2 per cent, a third lower than before the crisis.

Resolution Foundation research director Gregory Thwaites said that the encouraging signs “risk breeding dangerous complacency, as people overplay the health of the labour market, and underplay the risks that still lie ahead.”

“A recovering labour market is not the same as a recovered one. Labour shortages in hospitality aren’t a huge problem, and there is no real evidence of a new pay boom.”

TUC general secretary Frances O’Grady said: “Our economy is not out of the woods.

“The Chancellor needs to announce now that he will extend furlough for as long as is needed, rather than cutting it off abruptly in three months’ time. 

“Working families need this certainty, not a rollercoaster approach to protecting livelihoods.”