LOOKING at Britain's latest jobs data, published last week, it seems Britons have almost never had it so good. In the three months to the end of April, the number of people in work rose at its fastest level on record. Unemployment fell to its lowest level in five years. Participation in the workforce is now within a whisker of its all-time high. George Osborne, Britain's Chancellor, concerned about his party's ratings in the run up to next year's election, has done his best to try and take credit for this remarkable performance. At his annual Mansion House speech last week, he told the City of London's top brass that Britain is "growing faster than any advanced economy in the world", with "a record number of people at work" due to his policies. But Britain's jobful recovery—to some extent—is as much due to the failure of government initatives as to their success.

What is so remakable about the latest statistics is not simply the speed at which employment levels are soaring and unemployment tumbling. Usually, in such a situation, economists expect a shortage of spare workers to bid up wages, or that a scarcity of skilled workers in some sectors would create inflationary bottlenecks in the economy. But neither currently appears to be happening. Consumer-price inflation in the year to May fell to just 1.5%. Although there was a slight rise during the previous month, higher energy prices and the timing of the Easter holidays seemed to be driving the increase, rather than any shortage of labour. Wages in fact grew just 0.7% in the quarter to April. And, so far, growth shows no sign of accelerating.

That begs the question, why is Britain's job market still so slack? One major cause has been the expansion of the labour pool. Since the recovery started, many economists have noted that there has been a rise in the number of self-employed and part-time workers, who have boosted Britain's pool of willing workers. The lacklustre performance of pension investments since the financial crisis, as well as record-low annuity rates, have also encouraged older workers to delay retirement and stay in the workforce for longer, typically becoming self-employed consultants. And a government crackdown on benefit claimants has also pushed more people of all ages into part-time work.

But that explanation no longer explains the entire picture. Over the last six months, most of the increase in employment has been accounted for by full-time jobs—not part-time or self-employed ones. And the pool of under-employed workers seems mostly to have been soaked up at this point, according to a recent research note by Michael Saunders at Citigroup, a bank. The number of Britons seeking to decrease the number of hours they are working now outnumbers those who are underemployed and want to work more hours, official statistics show.

Instead, Britain's workforce is being swelled by another pool of underemployed labour—the jobless masses of Europe's peripheral economies. While the government has attempted to cut immigration over the last few years, the flow of migrants from other EU countries has tripled since the start of the recovery in 2010. That should be no surprise. Britain's economy has outperformed that of the euro zone since 2010 and the IMF has forecast it will continue to grow at twice the rate of the single-currency area until at least 2018. Many of the arriving workers are fleeing youth unemployment rates of over 50% in countries such as Spain and Greece, and are young, highly-educated and are more flexible than the natives. Many are also being encouraged by their own governments to leave in hopes of reducing welfare expenditures. Last year, Ireland's welfare authorities even started to write letters to long-term job seekers advising them to come to Britain to find work.

That has made it much easier for British firms to recruit abroad when they face a labour shortage—helped by the development of specialist cross-border recruitment websites. Many business leaders in Britain now say that the level of unemployment in Britain has become almost irrelevant to how much spare capacity there is in some sectors. For instance, London's rapidly growing building sector is now as likely to look for skilled labour in rural Slovakia and Spain as they are Surrey or Slough.

That has kept wages low in two ways. Firstly, recruiting workers from countries which much higher levels of unemeployment has prevented a shortage of skilled workers from bidding up wages in Britain since the recession. And secondly, the consequence of this—falling real wages—has depressed business investment as firms find it cheaper to hire more workers to perform tasks than to invest in labour-saving machines or software, according to Bill Martin at Cambridge University. That has continued to depress labour productivity over the last year, again reducing the ability or desire of firms to raise wages any further than they already have.

To some extent, this has been the result of government policies not working. The failure of the government's declared aim of reducing net migration to the "tens of thousands" by the next election, which now looks like it will be missed completely, has enabled hundreds of thousands of Europeans to move to Britain and find work. And government schemes to boost business lending have also misfired. Even with record low interest rates, and credit-easing schemes such as Funding for Lending, net business lending is still falling—by £2.7 billion alone in the first quarter of 2014.

Ironically, these short-term failures may set the British economy up nicely for the long-run. A British workforce that is swelling with highly skilled and motivated migrants will boost future productivity growth and incomes. Enhanced connections with the rest of Europe will greatly benefit London's booming business and professional services sector, which is reliant on international networks. And in due course, firms will start to borrow and invest more again as their belief in the sustainability of the economic recovery grows. Whether rising confidence and wages will arrive in time to save Mr Osborne in 2015's elections is another question.