Labour Market Statistics, May 2024

 | Institute for Employment Studies  | May 2024

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No news is bad news in today’s jobs data. Estimates of employment, unemployment and economic inactivity are almost identical to the figures published last month, which is very disappointing given how bad last month’s figures were. The employment rate remains stuck at its lowest since 2017, while economic inactivity is at its highest in nearly a decade. The last few years have seen the most significant and prolonged contraction in the size of the labour force since the late 1980s recession, which is holding back growth and undermining improvements in living standards.

Overall, there are now 900 thousand more people out of work than before the pandemic, with this continuing to be explained by more people off work due to long-term health conditions, more older people out of work and fewer young people in work. This is happening despite 900 thousand unfilled jobs in the economy and continued strong growth in earnings. On the former, vacancies appear now to be levelling off and remain well above pre-pandemic levels in almost all parts of the economy (the main exceptions being retail, transport/ storage and the arts/ entertainment). On the latter, if anything earnings growth has picked up again since the turn of the year – particularly driven by many lower-paying industries where rises in the National Living Wage will likely lead to continued strong growth through the spring. Short-term unemployment and redundancies also remain flat, reiterating that weak labour supply is holding back demand rather than the other way round.

For those in work however, there are signs that more people are able to get the hours and the form of employment that they want – with the number of people either overemployed or underemployed (i.e. working more or fewer hours than desired) at its lowest in nearly twenty years; the number in temporary work because they can’t find a permanent job its lowest since at least the early 1990s; and fewer in part-time work because they can’t find a full-time job than since the eve of the financial crisis. However while all of this is welcome news, it is of no benefit to the growing numbers who are outside the labour force entirely.

Today also sees new data on employment by place of birth, which comes with health warnings (like other LFS data), but suggests that if anything things could have been even worse had it not been for significant increases in employment among those born outside the UK – with employment down by 600 thousand for people born in the UK but offset by growth of 600 thousand for those born overseas (and specifically from outside of the EU). To be clear, low unemployment and high vacancies means it is very unlikely that higher migration has contributed to lower employment for people born in the UK. Rather, lower migration would likely have simply led to lower employment overall and therefore an even weaker economic recovery and even higher vacancies. It reiterates though the importance of doing more and doing better at meeting labour and skills shortages in future, especially given recent changes to visa rules and salary thresholds.

Overall then, today’s figures are very disappointing and suggest an increasing polarisation between those in work – who are seeing decent wage growth and some improvements in working hours and security – and those out of work, whose numbers are growing particularly among older people, young people and those with poor health.

Harsh rhetoric around a ‘sicknote culture’ or welfare being a ‘lifestyle choice’ will do nothing to narrow those gaps and if anything may end up pushing people further away from help and support. In our view, the priority instead in the last few months of this parliament should be to get on and deliver the commitments that have already been made – including new investment in specialist support for disabled people and those with long-term health conditions, the ‘chance to work guarantee’ that will protect people’s benefit status if they take up work, improved access to health and childcare support, and so on. And in the longer term, we need more radical reform of our approach to employment support and services so that we can extend access to support, improve the quality of support, join up better across services, and engage better with employers. (as we will be setting out in our Commission on the Future of Employment Support, in partnership with the abrdn Financial Fairness Trust).