At first glance, the UK jobs market is in rude health. The unemployment rate is back to where it was before the Covid pandemic arrived two years ago and job vacancies are at a record high.

But just as X-rays can pick up health problems not detectable to the naked eye, so a closer inspection of the labour market shows up some hidden damage. The Covid crisis has not led to the sharp increase in joblessness that was feared, but it has still left scars.

The number of employees is more than half a million lower than it was in early 2020, primarily due to people over 50 no longer working. According to the Learning and Work Institute thinktank there would be 1.25 million more people in the labour market had pre-pandemic trends continued.

The Office for National Statistics (ONS) says there is no one reason for the rise in inactivity. Some have decided to stop working due to ill health, officials believe, while the events of the past two years have convinced others that the time is right to call it a day. Whatever the reason, demand for workers currently exceeds supply, which is why the number of vacancies is so high.

Unsurprisingly, employers are responding to the dearth of workers in a variety of ways. They are offering part-time staff longer hours, they are offering sign-on bonuses to new recruits and they being forced to raise pay rates. The ONS thinks it is possible some of the inactive older workers may be tempted back into the labour market as the cost of living crisis bites harder over the coming months.

For public sector workers, falling real pay is already an issue. While bonus payments mean the earnings of people in the finance and business sector have risen by an average of 9.8% over the year to February – well above the 6.2% rise in prices over the same period – public sector pay rose by just 1.9%.

Inflation is expected to rise above 8% in April, intensifying the squeeze on public sector workers. Unions representing teachers, nurses, civil servants and local government workers are not going to be especially receptive to calls for wage restraint from Rishi Sunak, especially in light of the chancellor’s recent political and personal difficulties.

In the next few months there will be either an exodus of public sector workers to fill the job vacancies in the private sector or industrial action for higher pay. Probably both.

Sri Lanka’s default points to broader crisis

Sri Lanka’s first debt default since independence is an example of the long economic shadow cast by the war in Ukraine. Far from being a one-off, it highlights the risk of a broader debt crisis.

The decision by the government in Colombo is hardly a shock. For months, Sri Lanka has been hoping something will turn up, but any boost to revenues from the resumption of tourism has been outweighed by the Omicron variant of Covid and the rising cost of fuel and food. The country could either use its dwindling stock of foreign currency reserves to pay its creditors or buy essential imports.

The negotiations with the International Monetary Fund (IMF) due to begin soon will doubtless result in the customary package of higher interest rates and cuts in public spending. There is no immediate prospect of life for ordinary Sri Lankans getting any better, but the prospect of an IMF deal will put pressure on creditors to accept a debt restructuring.

Sri Lanka is not alone in finding the going tough. Speaking in Warsaw, the World Bank president, David Malpass, said 60% of low-income countries were already in debt distress or at high risk of it. Sri Lanka is not classified by the World Bank as a low-income country. Nor is Ukraine, which is trying to meet more than $7bn of debt payments this year while simultaneously fighting a ruinously expensive war.

Malpass has announced an extra $1bn (£770m) package of aid for Ukraine and without question the money will be welcomed by Kyiv. Even more welcome would be action by finance ministers at next week’s spring meetings of the World Bank and the IMF in Washington on an effective global debt restructuring mechanism that would deliver meaningful relief for countries in dire need.