Labour Market Statistics, July 2024

Today sees publication of the first jobs data since the election, and lays bare the scale of the challenges facing the new Labour government. Employment remains in the doldrums – down by more than one percentage point over the last year – while ‘economic inactivity’ (which describes those people who are not looking and/ or not available for work) is at its highest in a decade. Unemployment meanwhile continues to tick up, reaching 4.4%. All told, there are now half a million more people out of work than there were this time last year, driven in particular by more people outside of the labour force entirely.

This month’s briefing looks in more detail at the make-up of this group, and shows that four fifths of the growth over the last year is explained by more men out of work, particularly due to long-term ill health and non-working students, and especially men aged under 50. That being said, women continue to be far more likely than men to be out of work (around a quarter of all women aged under 65 compared with one fifth of men) so recent trends have narrowed rather than eliminated these gaps.

More broadly, while it remains our view that problems with our supply side labour market policies are holding back economic growth, there are some signs in today’s data of a softening in labour demand. In particular, short-term unemployment appears to be edging up, while today’s vacancy figures are disappointing – with a further fall of 30 thousand over the last quarter, bringing them to their lowest level in three years. Nonetheless, they remain significantly higher than pre-pandemic and redundancies remain close to their lowest on record. The labour market is continuing to produce jobs and we can do far better at helping people and employers to fill them.

More positively, data on pay growth remains fairly strong – at above 5% year on year, and with ‘real’ pay above 2% as inflation eases – and shorter-term measures of pay growth suggest that if anything it may improve further in the coming months.

Looking ahead, the government is right to have prioritised economic growth in its first few weeks and to be looking to ‘take the brakes off Britain’. There are few areas where this applies more than in the labour market: if we are to get back to sustained growth then we need to help more people to get back into work. The government’s early announcements in this space are welcome – around reforming Jobcentre Plus to become a genuine Jobs and Careers Service; working locally to integrate employment, health and skills support; reforming the apprenticeship levy to incorporate wider training; and offering a meaningful guarantee of support for young people – and very much echo the five priorities that we set out during the election. There is scope to go further too, and we will make this case in the forthcoming final report from our Commission on the Future of Employment Support, in partnership with the abrdn Financial Fairness Trust.

In the meantime though, the government also has to move quickly to address the cliff-edges left by their predecessors, particularly with specialist employment support for disabled people and those with health conditions ending in September, delays to the replacement ‘Universal Support’ programme, and local ‘Shared Prosperity Fund’ projects due to end in March. The good news is that upwards of £1bn of new money has been committed through Universal Support, but this needs to be deployed more quickly – and in our view more pragmatically and flexibly – in order to ensure that more people who are out of work and want to work can get access to the help that they need.