Labour market overview – labour market shifting to new ground

Info from ONS and REC

The UK employment rate was estimated at 75.7% in April to June 2023, 0.1 percentage points lower than January to March 2023. The quarterly decrease in employment was driven by full-time employees and self-employed workers.

The estimate of payrolled employees for July 2023 shows a monthly increase, up 97,000 on the revised June 2023 figure, to 30.2 million. The July 2023 estimate should be treated as a provisional estimate and is likely to be revised when more data are received next month.

The unemployment rate for April to June 2023 increased by 0.3 percentage points on the quarter to 4.2%. The increase in unemployment was driven by people unemployed for up to 6 months.

The economic inactivity rate decreased by 0.1 percentage points on the quarter, to 20.9% in April to June 2023. The decrease in economic inactivity during the latest quarter was largely driven by those inactive because they are looking after family or home. Meanwhile, those inactive because of long-term sickness increased to a record high.

Flows estimates show that, between January to March 2023 and April to June 2023, there was a large net movement from economic inactivity into unemployment.

In May to July 2023, the estimated number of vacancies fell by 66,000 on the quarter to 1,020,000. Vacancies fell on the quarter for the 13th consecutive period.

Annual growth in regular pay (excluding bonuses) was 7.8% in April to June 2023, this is the highest regular annual growth rate we have seen since comparable records began in 2001. Annual growth in employees’ average total pay (including bonuses) was 8.2%; this total growth rate is affected by the NHS one-off bonus payments made in June 2023. In real terms (adjusted for inflation using Consumer Prices Index including owner occupier’s housing costs (CPIH)), annual growth for total and regular pay rose on the year, by 0.5% for total pay, and by 0.1% for regular pay.

There were 160,000 working days lost because of labour disputes in June 2023. Over half of the days lost because of labour disputes in June 2023 were in the Health and Social Work sector.

Kate Shoesmith, REC Deputy Chief Executive, said:
“This is a labour market shifting to new ground and one the Bank of England and government will closely monitor because of the direct impact it is having on the economy. The unemployment rate is marginally above most predictions and we’re getting a sense of a loosening jobs market – where the demand for talent in certain sectors remains high, while there is a fall back in demand in other key sectors. These issues are deeply intertwined. For example, it’s particularly concerning to see the record high of economically inactive people because of long-term sickness, meanwhile, we continue to see significant problems recruiting and retaining staff in the health and care sectors. We need a fundamental rethink of the models of work in the NHS and beyond.  

“The labour market remains tight enough to continue to put pressure on employers by pushing up pay, with the highest regular annual growth rate we have seen since comparable records began in 2001 – but much of this will be down to recent pay deals negotiated and is one to watch closely. Pay is important, but it is not the only thing employers should consider. Today’s workers weigh pay against the whole package, such as flexible working, training, annual leave – and even whether the corporate culture aligns to their personal values. This is why our Overcoming Shortages report last year stressed to employers the importance of working conditions and getting the offer right.

“The fact there are still over one million job vacancies calls for a better jobs matching service. This is where high quality recruiters and employability experts can make a real difference to an overstretched system. The government can then focus on greater support for people with disabilities and long-term health problems, and comprehensive care services – as these are the barriers that prevent people from getting and staying in work.

“More broadly, today’s data points to why we need a plan for economic growth and investment in the UK. A proper industrial strategy that tackles the big issues we face, and which fully encompasses workforce thinking around skills, transport, access to work and immigration is long called for and urgently needed.”