Labour Market Statistics, April 2022
The attached briefing sets out analysis of the Labour Market Statistics published this morning. The analysis mainly draws on Labour Force Survey (LFS) data, which is the main household survey that collects official figures on employment, unemployment and economic inactivity and covers the period up to February 2022 (the most recent quarter being December 2021 to February 2022). The briefing also includes findings from the ONS Vacancy Survey, which collects employer data on open vacancies; and from the Monthly Wages and Salaries Survey, which collects pay data from businesses in order to estimate Average Weekly Earnings (AWE). The Vacancy Survey includes data up to March 2022, and the Wages and Salaries Survey to February 2022.
Today’s figures are overall very disappointing. A further fall in unemployment, to its joint lowest since 1974, is masking a continued decline in the size of the labour force – with employment flat on the quarter and economic inactivity (the measure of those not looking for work and/ or not available for work) rising. There are now 590 thousand fewer people in work than before the pandemic and 490 thousand more people economically inactive.
This growth in worklessness continues to be driven by fewer older people in work and more people out of work due to long-term ill health. There are now 610 thousand more older people economically inactive than pre-pandemic, while today’s figures report the largest annual growth in worklessness due to long-term ill health since records began in 1992 – taking the figure to 2.38 million (its highest since 2004).
Overall labour force participation (the number employed plus unemployed) fell sharply at the onset of the pandemic but then levelled off from late 2020 to late 2021. However it has been falling again since the end of the furlough scheme, likely in part due to (older) people who were technically counted as employed but on furlough leaving the labour market entirely when the funding ended. These continued falls mean that there are now 1.17 million fewer people in the labour force than we estimate would have been the case had the pre-pandemic trend (of rising participation) continued.
Despite falling unemployment, long-term unemployment remains significantly above pre-pandemic levels; with the long-term unemployed now account for 35% of all of those unemployed (compared with 28% two years ago). Short-term unemployment is at its lowest ever level.
All of this continues to happen despite record vacancies, with this month seeing as many vacancies as there are unemployed for the first time in at least fifty years. There are also some signs in more timely weekly data that job turnover remains well above pre-pandemic levels and may even be rising. This in turn is likely further fuelling vacancy growth as firms struggle to backfill posts from the (dwindling) numbers who are out of work, looking for and ready to work.
This tight labour market does appear to be feeding through into higher nominal pay, with regular pay growth above 4% and seemingly higher rates of growth in (private sector) industries with higher vacancies. However, soaring inflation is pushing regular pay negative in real terms – for the fourth month in a row – while total pay remains just positive due to high bonus payments in the private sector.
All told, higher worklessness, negative pay growth and continued labour shortages look to be a pretty toxic mix for living standards, with little sign in today’s data that any of those three problems will get any better in the next few months. Our view remains that these problems will not fix themselves, and that we need a new ‘Plan for Participation’ – from government and employers – to help more people back into the labour force; improve recruitment, job design and workplace support; and help those out of work to get into and on in work. We also need more support for living costs for those out of work and on low incomes, particularly given the significant real-terms cuts to benefits this year.