Labour Market Statistics, June 2022
Today’s figures are disappointing. While employment, unemployment and economic inactivity have all improved slightly on the last quarter, today’s data is only marginally better than the figures published last month – with very weak single-month estimates for April wiping out the very strong single-month estimates for March that we reported on last time. Unemployment has actually ticked up slightly compared with last month’s data, although this may in part reflect more people entering the labour force from economic inactivity (with economic inactivity among students falling by a similar amount).
The worst data today though was on pay, with the largest falls in real pay on record (down 3.4% compared with April 2021), as rocketing inflation more than wiped out continued relatively strong nominal pay growth (of 4.1%). Pay growth is particularly weak in the public sector (down by nearly 6% in real terms), with some signs that in the private sector it is growing strongest in those industries with higher vacancy levels (particularly in service industries). While this is far from a ‘wage-price spiral’, it may well add to concerns that relatively high nominal pay growth alongside weak GDP and productivity data could put further upward pressure on inflation.
The tight labour market continues to be reflected in high levels of vacancies and relatively low participation in the labour force. On vacancies, these hit a record high of 1.3 million today but growth is now clearly slowing, with job openings up by 85 thousand over the last six months compared with 450 thousand over the six months before.
On participation, there remain around a million fewer people in the labour force than on pre-pandemic trends. with around three quarters of this explained by higher economic inactivity – particularly among older people and those with long-term health conditions. And while economic inactivity among older people was marginally better in today’s data than in recent months, ill health worklessness was marginally worse (and is back at a twenty-year high).
Overall then, the labour market continues to see a toxic combination of falling real terms pay, high worklessness and labour shortages. As we set out last month, our response to this cannot only be to try to cool demand through interest rate and tax rises – we also need a plan for higher participation and measures to boost labour supply. In particular this should be focused on expanding access to employment and skills support for people who are out of work but not currently eligible, and could use funding already committed for the unemployment crisis that we averted (where savings are likely to run to at least £2 billion). Firms will also need to do more (and be supported to do so) – particularly through more inclusive recruitment, flexible job design, and improving job security, quality and support at work.