Labour Market Statistics, June 2024

This has been a pretty dismal five years in the labour market, and today’s jobs figures confirm that this Parliament has seen the weakest employment growth since 1979-1983, alongside the largest increase in ‘economic inactivity’ in a single Parliament since comparable records began in 1971. The latest data is even worse than the poor figures that we have seen over the last couple of months, with the employment rate falling again, to its lowest since 2017; economic inactivity now higher than it was in the depths of the pandemic; and unemployment edging up slightly (but remaining low by historic standards).

The ONS have cautioned again not to read too much into short term changes given lower response rates to the Labour Force Survey, and recent analysis by the Bank of England also casts further doubt on the population estimates being used in the LFS. This means that the LFS may be under-stating levels of activity/ inactivity although this would not affect the estimates of rates – and estimates of rates are equally bad, with the proportion of people aged 16 and over who are outside the labour force now at its highest since 1998. As with previous months, this is being driven in particular by more older people out of work, fewer young people in work, and more people off work with long-term health conditions across all age groups.

This contraction in the labour force is reversing a trend of near-continual growth between the mid-1990s and 2020, which in turn had been the main driver of economic growth over the last twenty years. However with employment growth stalling, economic growth has stalled too. This is being reported today as signs that the economy is ‘cooling’ but we continue to take the view that it is the labour market that is holding back economic growth, not the other way round. This is evident in the fact that short-term unemployment is not rising, redundancies are flat, vacancies have levelled off at around 900 thousand unfilled jobs, and earnings are growing by around 6% year on year.

So in our view, it is our ‘supply side’ policies that need reform – on employment support, skills, health, support for employers, transport and more. We have set out five priorities on employment support specifically, drawing on our Commission on the Future of Employment Support, and will publish fuller proposals after the general election. The good news in all of this though is that it is not a lack of demand that is holding us back – so if in future we can get more of this right then there is no reason why the next Parliament should not be better than the last.