The number of employees on British company payrolls surged by a record amount in May as COVID restrictions eased and pubs and restaurants resumed indoor service, though it still remains more than half a million below its pre-pandemic peak.

Tax data released on Tuesday showed that British companies increased their number of employees by 197,000 in May, the biggest single-month increase since records began in July 2014, taking the total to 28.5 million.

Tuesday's figures also showed the fastest headline wage growth since 2007 in the year to April, although statisticians warned that this was distorted by comparisons with depressed wages a year ago and greater job losses among low-paid staff.

"The level of employment is still well below its pre-crisis level, suggesting there is still plenty of slack in the labor market," said Thomas Pugh, UK economist at Capital Economics.

The headline unemployment rate fell for a fourth month in a row to 4.7 percent for the three months to April, in line with forecasts in a Reuters poll of economists.

"The latest forecasts for unemployment are around half of what was previously feared and the number of employees on payroll is at its highest level since April last year," finance minister Rishi Sunak said.

The jobless rate has been kept down by the government's furlough program. This paid wages on 8.9 million jobs at its peak in May 2020, during the first COVID lockdown, and supported 3.4 million jobs in April 2021.

The most job vacancies

More recent survey data pointed to a further fall to just over 2 million jobs by mid-May, and Tuesday's data showed the most job vacancies since the pandemic began.

The biggest rise in vacancies was in the accommodation and food service sector. The sector was hit hard by the pandemic, and will face an extra challenge in coming weeks as the full lifting of COVID capacity constraints has been delayed until July 19 due to the spread of a new, more infectious, COVID variant.

The Bank of England predicted last month that unemployment would only rise modestly when the furlough scheme stops at the end of September 2020, and is keeping a close eye on inflation pressures – though it still sees substantial slack.