Labour Market Statistics, May 2022
Today’s figures have some good news as well as continued reasons to be cautious. Unemployment has fallen to its lowest since 1974, there are green shoots on employment growth and economic inactivity in the data for the single month of March, and strong private sector pay is keeping total pay growth slightly ahead of inflation. All of this is welcome, and not entirely expected given the very weak data for the last two months.
However, today’s data also lays bare the extent of the recruitment and participation crises affecting the labour market. Overall there are still around 1.15 million fewer people in the labour force than on pre-pandemic trends; nearly half a million more people economically inactive, with recent rises being due to long-term ill health and caring responsibilities; and continued wide employment ‘gaps’ for disabled people, ethnic minority groups, and older people. The headline picture on pay also disguises relatively weaker growth in ‘regular’ pay excluding bonuses (suggesting many firms are cautious about the recovery) and significant falls in public sector pay.
New data on labour market ‘flows’ today also illustrates how recruitment challenges are being driven by exceptionally high labour market turnover – with a record number of people changing jobs in the last quarter (nearly a million); near-record levels of resignations; and large numbers flowing into and out of work. These flows to and from worklessness are being driven in particular by flows into and out of economic inactivity, although relatively low flows from inactivity to unemployment mean that overall flows out of inactivity are flat over the last year, despite continued strong vacancies.
All told, as with recent months, this combination of high worklessness, labour shortages and spiralling inflation risks being a pretty toxic mix. So far, public policy is responding to this mainly by trying to dampen demand through higher interest rates and higher employer National Insurance. However we would argue that we also need to see far great focus on measures to boost supply – which would support higher growth, improved household incomes and lower inflation. In particular, we remain concerned that government appears to be cutting employment support at exactly the time that we should be increasing it (by laying off Jobcentre Plus work coaches, cutting back on the Restart scheme and not reinvesting underspends from Kickstart); and that its Way to Work campaign is focusing on the short-term unemployed at a time when short-term unemployment has never been lower.
So we continue to believe 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.