More people are entering or returning to work as the cost of living continues to bite into household finances.
The Office for National Statistics said a record number of people moved out of “economic inactivity”, which is defined as people not looking for work, between July and December, as more got jobs.
It was driven by people in the 16-24 age group, as well as 50-64-year-olds.
One analyst suggested a “great unretirement” trend had emerged, with older people returning to work.
The UK’s economic inactivity rate, the proportion of people aged between 16 and 64 who are not in work or seeking to be, had been generally falling since records started in 1971, before it increased during the Covid pandemic.
The recent increase was driven by those aged 50 to 64 due to early retirement and illness, as well as students.
But the trend has started to decrease in recent months. The ONS said the fall in economic inactivity during the latest three-month period was driven by those aged 16 to 24.
Darren Morgan, director of economic statistics at the ONS, said in the last three months of 2022, fewer people remained outside the labour market altogether, with some moving straight into jobs and others starting to seek work again.
“This meant that although employment rose again, unemployment also edged up,” he added.
More people looking or entering work is partly down to the rising cost of living, according to Helen Morrissey, head of pension analysis, at Hargreaves Lansdown.
“The great unretirement helped drive a record number of people back to work in the year to October-December,” she said, after what she described as an “exodus from the workplace” during the pandemic.
“People are realising their pensions may not go as far as they had expected. However, we also know some of these people stopped work because of long-term sickness, so better health may have encouraged them to reconsider a return to work.”
But unretirement doesn’t paint the “full picture”, she added, as young people entering the workplace, many for the first time from education, played a “major role” in the rate falling.
UK economic growth has flatlined in recent months and the Bank of England expects the UK to enter a recession this year. Many industries have struggled to recruit workers, though job vacancies are falling.
The government has been considering plans to coax retired middle-aged workers back into jobs in a bid to boost the economy, with reports older workers could be offered a “midlife MoT” to assess finances and opportunities for work.
Kate Shoesmith, deputy chief executive of the Recruitment and Employment Confederation, said the government’s Spring Budget was an “opportunity” for the government to provide “support so that the economy can thrive despite the now stubborn labour shortages”.
“Improving childcare support and provision to enable more parents to work and older workers such as grandparents to stay in work is vital, as is reinvigorating welfare to work schemes,” she said.
While more people look for work amid the rise in energy and food prices squeezing household finances, many have asked for pay rises in recent months.