December Labour Market Statistics: comment from the Institute for Employment Studies

IES News

17 Dec 2024

This briefing sets out analysis of the Labour Market Statistics published this morning. Today’s LFS data covers the period of Aug-Oct 2024. While we discuss the numbers released today, we also briefly reflect over the past year and share our thoughts about the future.

The figures out today, as well as those of the past couple of months, show a clear improvement on the very weak data that we saw earlier in the year, with employment at 60.5%, unemployment at 4.3% and inactivity at 36.8%, all remaining at the same level as the previous quarter. The UK is the only major economy that has seen its employment rate fall over the last five years and employment and economic inactivity still remains worse than before the pandemic. Over the past year we have not witnessed any consistent indication of recovery. 

Figure 1: Employment, unemployment and economic inactivity rates (%) 

 Source: Labour Force Survey. Vertical dotted line indicates start of first Covid-19 lockdown.  

Over the past year overall inactivity has fallen by 0.4%, however, the highest fall has been observed among 18–24-year-olds (1.5%), followed by 65+ year olds (1%) and 25–34-year-olds (0.7%). On the contrary, there has been rising inactivity over the past year among 16–17-year-olds by 1.5%. In the broader age group of 16–64-year-olds, inactivity has been driven predominantly by people being out of work due to long-term ill health and looking after family and home, and this varies by gender. As noted in a previous briefing, in general, women are a lot more likely to be out of work than men, but inactivity has risen among men due to long-term illness by 1% and inactivity has fallen among women due to long-term illness by 0.7%. Inactivity has increased overall by 0.9% over the past year due to more people taking on family and caring responsibilities. However, among women this has risen by 2% over the past year, whereas, among men this has fallen by 0.4%.

Today’s figures clearly indicate that the government’s proposals to reform employment via the Get Britain Working White Paper is a step in the right direction. The focus on providing holistic support to economically inactive people due to long-term sickness by deepening the contribution of the NHS and the wider health system, should go some way to ensure that young people get a 360-degree support which focusses on both their health and skills, along with a modern growth strategy that creates more good jobs in every part of the country. This will be a critical step in helping many more people into employment. This strategy, when combined with a focus on the health benefits of well-paid, flexible, and good-quality work, is essential for achieving significant economic and social returns.

Vacancies have continued to decrease, with the gap between claimant count and job vacancies widening in the past year. We have noted in previous briefings (e.g., July, September, October) that there were signs of a softening in the demand for jobs in the economy over the early summer, that continued in early autumn, with weaker-than-expected vacancy figures. Today’s release saw a further quarterly fall that brought the number to 818 thousand from previous 828 thousand – a new lowest level since April-June 2021. Overall, the change on year in vacancies since Nov-Jan 2024 is -11.4%. This suggests that while equipping those that need the necessary skills will be critical to strengthen the supply of labour through the ‘Get Britain Working’ plan, it will also be key for the government to back up this plan with the focus on a modern industrial strategy that grows the demand for jobs.

​Pay growth remains weak, with ‘real’ pay pausing at 3%.Today’s pay figures suggest that pay growth has slowed if not worsened. Both regular pay (excluding bonuses and arrears) and real pay appears to be pausing after their recent rise, with real pay growth hovering around 3%. This is well below the heady peaks of 8% growth that we saw a year ago, but as the ONS note those figures were aided by large public sector pay settlements and yesterday’s figures are weaker for being compared with them. The underlying pay figures remain strong by historic standards, but nominal pay appears to have stopped growing, while real pay seems to have reached a plateau.