Labour Market Statistics, February 2024

 | Institute for Employment Studies  | Feb 2024

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This briefing note sets out analysis of the Labour Market Statistics published this morning, which includes newly reweighted estimates from the Labour Force Survey (LFS), following revisions made by the ONS to take account of the 2021 Census.

Overall, it sets out that things in the labour market are a bit worse than we had previously thought, with the employment rate nearly one percentage point lower and ‘economic inactivity’ (the measure of those outside the labour force and not looking and/ or not available for work) more than one percentage point higher than the estimates published last month. This reflects the impacts of ONS’s reweighting, which has led to substantial increases in the estimated size of the population and to larger growth for those out of work than those in work.

However even comparing reweighted figures with reweighted figures, the picture today is not great. The employment growth that we seemed to be seeing through 2022 has at best stalled, while economic inactivity is if anything edging up. Overall there are nearly 700 thousand more people out of work than before the pandemic began, with this now almost entirely explained by more people outside of the labour force due to long-term ill health. Figures published today for youth participation are also particularly worrying, with record numbers of young people neither in full-time education nor the labour force (at nearly three quarters of a million).

This continued weak recovery is happening alongside very low unemployment – at just 3.8% – and continued strong vacancies (930 thousand) and pay growth (6.2% year-on-year), although both have fallen back from their peaks. So despite the weak employment data, and despite much higher interest rates and sluggish growth, demand in the labour market appears to be faring pretty well – it is just not being met with labour supply, which will in turn be further holding back growth and undermining living standards.

To the extent that there are positives in today’s data, however, the revised estimates still do not point to higher interest rates pushing the labour market into a ‘hard’ landing: short-term unemployment has not risen in recent months, redundancies remain low and vacancies are still high. The revised population estimates in the LFS also mean that the overall level of employment this year is the highest it has ever been – the trouble is that employment growth is not keeping pace with population growth.

So these figures reiterate the need for us to do much better in helping people out of work to get into work; helping those in work but struggling to stay there; and working with employers to fill jobs and support people in them. The government has announced welcome measures on the first of these three things (support for those out of work), particularly with the new Universal Support programme, Restart extension and more investment in employment advisers. However these measures are taking time to get going, and have been accompanied by unremittingly negative rhetoric around benefit claimants and sanctions – which pushes further away many of those who would most benefit from better support. We have also seen very little focus on employer engagement – either in terms of additional support or increased expectations.

In the short term, next month’s Budget provides an opportunity to address this. However in the longer term we need a new approach, as we have been working to set out through our Commission on the Future of Employment Support