Labour Market Statistics, June 2023

The labour market is continuing to recover – with employment up, record earnings growth, falling economic inactivity and unemployment below 4%. Last month’s concerns that the labour market may have been starting to weaken have been dispelled, with strong figures for the month of April and a sharp upward revision in the estimate for payrolled employee jobs. Both the estimated number of people employed and number of hours worked are now at their highest ever levels.

These improvements are being led by more older people in work, and in particular more older men. However while this recovery in employment is welcome, there still remain around half a million more older people out of work than before the pandemic began, while the employment ‘gap’ between older men and older women is rising for the first time on record – from 8.0% on the eve of the pandemic to 9.1% in the most recent data.

Worryingly, today also sees a further rise in the number of people off work due to long-term ill health, which has now hit 2.55 million and has risen for ten of the last eleven months. This is nearly 30% of all of those outside of the labour force, compared with 25% three years ago. Employment for young people outside of full-time education also appears to be falling, from 76% a year ago to 74% now – so fewer students is mainly feeding through into more young people neither earning nor learning (which hit a million today, up from below 900 thousand a year ago).

At the same time, vacancies remain above a million but continue to fall back from the peaks that they reached a year ago. Vacancies are holding up in many public services and in private sector professions, but falling in retail, hospitality and in information/ technology. Given how high vacancies remain overall, it is likely that these recent falls reflect a bit more slack in the labour market (and employers filling their vacancies more quickly) more than a weakening of demand (and wider indicators on short-term unemployment and redundancies were positive today).

Earnings growth was exceptionally strong, up by 7.5% between April 2022 and April 2023 (the highest figure in at least twenty years). In part this pay growth will reflect firms and workers responding to higher inflation, as well as firms responding to labour shortages in some parts of market. However, it also reflects the impacts of a large increase in the National Living Wage in April (up by around 9%) and a slew of pay deals for public sector workforces. So it is likely that nominal pay growth will ease over the summer (alongside lower inflation).

Nonetheless, it is likely that today’s figures will lead to more pressure to raise interest rates in order to dampen demand and bring down pay growth. While this is understandable, our view is that the top priority should instead be to do far more to boost supply, which would in turn support higher living standards and economic growth. This means in particular doing far more to support people who are out of work and who want to work – especially those with long-term health conditions, disabled people, young people and older workers – and working better with employers on inclusive recruitment, job design, workplace support and progression in work.