Labour Market Statistics, March 2024

This briefing note sets out analysis of the Labour Market Statistics published this morning. It sets out that the labour market remains subdued, with employment broadly flat, unemployment still low at below 4%, but ‘economic inactivity’ well above pre-pandemic levels – with 700 thousand more people outside of the labour force than there were four years ago. In part, this may reflect weaker demand as a result of higher interest rates and living costs, but this hasn’t fed through into higher redundancies or unemployment, and we think that if anything labour and skills shortages are holding back what should be a stronger recovery.

Higher worklessness is particularly due to more older people and younger people out of work. For older people this is reversing the trend over recent decades of our ageing population leading to larger increases in employment than economic inactivity, with older women in particular faring worse. For young people, one in seven are now outside full-time education or employment, the highest rate in nearly a decade. More young people out of work with long-term health conditions, and weaker growth in education participation among young men, appear to be driving recent growth.

Vacancies continue to fall back but remain well above pre-pandemic levels (at just over 900 thousand), while short-term unemployment has dropped a little in the last six months after rising last year. So the labour market remains fairly tight, and suggests that there are continued labour and skills shortages in the economy, albeit less acute than we were seeing in 2022.

Pay growth continues to be reasonably strong, with regular pay rising by close to 6% year-on-year and ‘real’ pay after inflation growing by close to 1.5%. Looking at more recent changes, quarter-on-quarter pay growth implies that pay growth may fall to around the 3-4% range, which would be more in line with longer-term trends (and a bit above what we saw in the 2010s) and should see real terms pay remaining positive this year.

Overall then, today’s data reiterates the need for a far greater focus on reaching, engaging with and supporting people who are not yet looking for work but would want to work with the right support. The government announced a range of measures in this space last year including nearly £1.5 billion in funding for a new Universal Support programme, the rollout of ‘WorkWell’ partnerships and pilots to improve joining-up across work and health, additional investment in specialist employment advisers in health services, and the extension of the Restart Scheme for the long-term unemployed.

However a year on from many of these announcements, we need to start to see changes on the ground – as well as a change in approach in jobcentres, where the over-riding focus seems to continue to be to require ever-more frequent attendance for the diminishing number of people who are registered as unemployed. Employers have a key role to play too, both to help people stay in work and to bring more people back into the labour force. This means looking at the drivers of decent work and wellbeing at work, which include secure work, good relationships at work, two-way flexibility, control and support when things go wrong.