The recent labour market data paints a worrying picture for the UK.
- Unemployment has been rising for four consecutive months, now standing at 4.4%.
- Job vacancies have declined for 23 periods, dropping to 904,000 between March and May 2024.
- Economic inactivity is increasing, with 2.83 million people out of work due to long-term illness.
- Wages have risen, but inflation remains a concern, complicating the economic outlook.
The latest figures from the Office for National Statistics (ONS) reveal a troubling trend in the UK labour market. Unemployment has been on the rise for four months straight, increasing from 3.8% in late 2023 to 4.4% in April 2024. This marks the highest unemployment rate in over two years. During this period, around 190,000 workers have joined the ranks of the unemployed.
Furthermore, job vacancies have declined for 23 consecutive periods. Between March and May 2024, the number of job openings fell to 904,000 – a drop of 12,000. This represents a significant decline from the peak recorded in the spring of 2022. However, it’s important to note that the current number of vacancies is still higher than pre-pandemic levels.
Meanwhile, the issue of rising economic inactivity continues to grow. The inactivity rate has increased to 22.3%, with an estimated 2.83 million people out of work due to long-term illness. Despite the Prime Minister’s criticisms of the so-called ‘sick note culture,’ this trend shows no signs of reversing.
Most of the private sector is cutting back on workers, notably in retail and hospitality. On the other hand, the health and social care sector showed positive signs with nearly 170,000 more workers over the three months to the end of April compared to the previous year. This increase likely reflects efforts to reduce waiting lists and ease the care crisis, though results have been mixed. The education sector has also seen some growth.
The overall picture remains one of a cooling labour market. The Resolution Foundation noted a fall in the employment rate for those aged 16-64, now standing at 74.3%. This figure is only slightly above the pandemic low of 74.1% set in winter 2021. The Foundation highlighted that this decline means the workforce is more than a million workers smaller compared to pre-pandemic levels.
Wages have risen by 6% excluding bonuses, or 5.9% when including them. While this is positive news for workers, inflation continues to persist, impacting the broader economic outlook. The Bank of England’s Monetary Policy Committee (MPC) is closely watching these developments. Wage growth, especially in the service sector, remains a concern for them as it could drive further inflation. As a result, it’s expected that the MPC will maintain its current stance during its next meeting.
The next Prime Minister will face significant challenges regarding the labour market. Jobs and people’s perceptions of their job prospects are crucial economic indicators that impact the electorate’s well-being. Addressing long-term issues such as skill gaps and workforce shortages in key sectors will be vital. The new administration will need to prioritise these concerns to stabilise the labour market and support economic recovery.
The next administration must urgently address the rising unemployment and broader labour market issues to secure economic stability and public confidence.