August Labour Market Statistics: comment from the Institute for Employment Studies
13 Aug 2024
Today’s labour market data (covering the period April to June, so immediately pre-election) sees a slight improvement on the very poor figures over recent months. Employment has edged up to 74.5%, back to where it was three months ago; unemployment has edged down to 4.2%, its lowest since the turn of the year; and ‘economic inactivity’ – the term used to describe people not available for work and/ or not looking for work – is broadly unchanged at 22.2%.
However, as the Office for National Statistics have set out, falling sample sizes make the Labour Force Survey highly volatile and they have urged caution in drawing conclusions from short-term changes. This particularly applies to unemployment, where so few people are unemployed that sample sizes are even smaller. It will take many more months to know whether unemployment is trending up, down or is broadly flat.
What we can say, then, is that employment remains in the doldrums – around the lows it reached during the depths of the pandemic, unemployment is very low by historic standards, and economic inactivity is around the highest that it has been for a decade. As with previous months, and as we have set out in last month’s briefing note, this continues to be driven by more older people out of work, fewer young people in the labour force (mainly because more are in full-time education, but also because one in ten are neither in education nor the labour force – the highest rate we’ve seen since at least the early 1990s), and more people at all ages are not in work due to long-term health conditions.
We have also said in recent months that in our view, this very weak labour market data is being driven by problems on the ‘supply’ side – how we help people who want to work to do so, and employers’ practices when people are in work – rather than the weak demand, and today’s data if anything provides stronger evidence that that is the case, with:
■ Vacancies continuing to edge down, but now showing more signs of levelling off at around 900 thousand unfilled jobs – well above pre-pandemic levels and backed up too by online vacancy data also flat over the last year;
■ Continued strong earnings growth – with regular pay 5.4% higher than a year ago, and a more timely measure of quarter-on-quarter pay growth suggesting that in recent months private sector pay is running at an annualised growth rate of 7% (aided by the recent increases in the National Living Wage);
■ Broadly flat short-term unemployment and youth unemployment, which are both early indicators of weaker demand; and
■ Very low redundancies – with also close to record low notifications of potential redundancies to the Insolvency Service (via ‘HR1’ forms), again a good leading indicator of weaker demand.
Taken together then, it remains our view that the biggest problems we face in the labour market are not about demand but supply – and in particular around employment support, skills, health and workplace practice. The new government has made significant announcements in each of these areas, but getting from announcements to action and then improved outcomes is a long road.
On employment support specifically, we are supportive of the proposals for a new Jobs and Careers Service, new local partnerships to support greater devolution and joining up particularly around health, and a guarantee of support for young people. Each of these echo findings from our Commission on the Future of Employment Support, in partnership with abrdn Financial Fairness Trust and on which we will be publishing more detailed proposals next month.
Finally, please note that due to summer holidays we will not be publishing a full briefing note today. Normal service on that will resume next month (10 September). In the meantime we hope that you all continue to enjoy your summers.