SCOTLAND's unemployment rate has continued to drop, but is not yet back to pre-pandemic levels, official figures show.

The Office for National Statistics (ONS) released its labour market data on Tuesday, showing Scotland’s unemployment rate between July and September was 4.1%, a drop of 0.2 percentage points from the previous quarter.

However, the unemployment rate remained 0.3 percentage points above the level for December 2019 to February 2020.

The employment rate also rose compared with the previous quarter by 0.6 percentage points to 74.8%, but remains 0.6 points lower than before the Covid-19 induced lockdown.

Latest figures from HMRC, however, show an increase in the number of people employed last month compared with the first month of the lockdown.

Some 2.39 million employees were recorded in Scotland in October by the tax agency, a 0.1% rise compared with February 2020.

Benefit claimants remained substantially higher than before the pandemic, with the number of people claiming Universal Credit for the principal reason of unemployment being 44,000 higher last month than in March last year.

However, this figure dropped by 2,100 from the previous month.

Employment minister Richard Lochhead said: “The Scottish Government continues to do all it can to support employees and employers and is investing more than £1 billion in 2021/22 to create jobs and ensure people have the skills needed to help seize Scotland’s potential and deliver a greater, greener, fairer and sustainable economy.”

Scottish Secretary Alister Jack said: “Today’s figures show encouraging signs for Scotland, with unemployment down and the number of people on the payroll continuing to grow.

 “Our plan for jobs is working, helping people secure well-paid, skilled work. New figures today show that 100,000 young people have started new jobs through the Kickstart scheme, among them thousands of Scots who’ve been helped onto the first rung of their career ladders.

“The UK Government’s priority continues to be levelling up across the length and breadth of the UK. With a record £41 billion in Barnett-based funding for Scotland per year, we are supporting businesses to grow, communities to thrive and job opportunities to flourish in every part of the country.”

In September, the Job Retention Scheme was scrapped after supporting millions of people through the pandemic, paying a proportion of their wages to allow their continued employment.

The figures appear to show little impact of the end of the scheme, providing some “early reassurance”, Dr Stuart McIntyre of the Fraser of Allander Institute said.

“In particular that there has not been an increase in claims for unemployment related benefits in October,” he said.

“Similarly, other survey data suggest that the vast majority of those still furloughed when that support ended at the end of September did not lose their job.

“Our economic recovery from the pandemic is in its initial stages, but the early signs are that the labour market impacts may be more modest than originally feared.”

Dr McIntyre added: “However, there remain significant challenges within the broader economy, including supply chain problems and continuing public health restrictions, and so there is still a risk that this fragile economic recovery may stall.

“There is also a long way to go in our understanding of the enduring effects of the pandemic on the labour market – in particular on young people and those with disabilities and long-term health conditions.”

Across the UK, the unemployment rate also fell once more to 4.3% between July to September, down from 4.5% between June and August, in spite of the furlough scheme coming to an end on September 30.

The ONS said survey responses so far suggest only a small number of redundancies have been made among the 1.1 million still on furlough when the scheme closed, with vacancies hitting also another record high.

The data also showed the number of payrolled workers surged by 160,000 or 0.6% between September and October to 29.3 million.

It said the payrolled worker numbers were now “well above” levels seen before the pandemic struck, up 235,000 since February 2020.

The robust data has reinforced expectations that the Bank of England will move to hike interest rates to cool rampant inflation before Christmas, if next month’s jobs figures just before the policymaker vote remain as rosy.

Sam Beckett, ONS head of economic statistics, said: “It might take a few months to see the full impact of furlough coming to an end, as people who lost their jobs at the end of September could still be receiving redundancy pay.

“However, October’s early estimate shows the number of people on the payroll rose strongly on the month and stands well above its pre-pandemic level.”

She added: “There is also no sign of an upturn in redundancies and businesses tell us that only a very small proportion of their previously furloughed staff have been laid off.

“In addition, vacancies again reached a new record high.”

Chancellor Rishi Sunak said the latest jobs figures were “testament to the extraordinary success of the furlough scheme”.

He said: “We know how vital keeping people in good jobs is, both for them and for our economy – which is why it’s fantastic to see the unemployment rate falling for nine months in a row and record numbers of people moving into employment.”