Labour Market Statistics, November 2021
This briefing note sets out analysis of the Labour Market Statistics published this morning. The analysis mainly draws on Labour Force Survey (LFS) data, which is the main household survey that collects official figures on employment, unemployment and economic inactivity and where the most recent data covers the period July to September 2021. This is supplemented by analysis from the ONS Vacancy Survey, which collects employer data on open vacancies and includes data up to October 2021.
Today’s data show a continued improving picture in the labour market, with unemployment falling sharply towards pre-crisis levels and employment increasing. New labour market flows data shows that underneath this, nearly 2.2 million people started new jobs in the summer (July to September) – the highest level and rate (7%) in at least twenty years, driven by record flows into work as well as record levels of job-to-job moves.
However despite these trends, vacancies have continued to grow strongly – across all industries – which combined with falling unemployment has led to the lowest number of unemployed people per vacancy since at least the early 1960s. Labour supply simply cannot keep up with demand, which in turn is holding back growth and adding to inflation.
A key cause of these problems is far lower labour market participation than on pre-crisis trends – with a participation ‘gap’ on our estimates of 950 thousand people. Around half a million of this gap is explained by fewer older people in the labour market, particularly older women. Worryingly, there are also signs today that higher economic inactivity is increasingly being driven by people out of work due to ill health or early retirement, while inactivity is falling among students and for ‘other’ reasons (like shielding or lockdowns). These trends have been emerging in the data for some months now, which makes it all the more disappointing that the Budget last month did not take action to address these growing problems, in particular for older people and those with ill health.
New data on employment for disadvantaged groups also presents a worrying picture, with employment gaps either growing or remaining stubbornly wide for disabled people, ethnic minorities, those aged over 50 and young people outside education. Combined with weaker than expected data on long-term unemployment, there are growing signs that the recovery is not being felt by those further from work – coming at a time of labour shortages, higher inflation and large cuts to Universal Credit, addressing this needs to be an economic and social priority.
Looking ahead, with the end of furlough unlikely to do much to ease the tightness in the labour market, unemployment just cannot fall much further and so mismatches between demand and supply will continue. The way out of this problem, as has been apparent for some months now, is through supply side measures to increase participation and improve skills matches. In particular we need to see much more focus now on support for those out of work and not looking for work, particularly to support those with long-term health conditions, older people, parents and disadvantaged young people. Firms too will need to (continue to) do more to support retention in work and more inclusive recruitment, including through offering greater flexibility, job security, training and induction, and workplace support with health, caring and wider needs.