Labour Market Statistics, October 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 June to August 2021. This is supplemented by analysis from the ONS Vacancy Survey, which collects employer data on open vacancies and includes data up to September 2021.
Today’s figures give the clearest sign yet that labour supply isn’t keeping up with labour demand, and should be sounding alarms in central government and the Bank of England. Unemployment has fallen back to 4.5% while vacancies have reached a new peak of 1.1 million – with the single month estimate for September standing at an extraordinary 1.2 million job openings. We now have 1.45 unemployed people per vacancy – the lowest figure in at least half a century, making this likely the tightest labour market that we have seen in modern times.
Unfortunately this tight labour market is not (yet) being reflected in rapid jobs growth, with employment continuing to recover slowly but remaining 660 thousand below pre-crisis levels. Taking account of the pre-pandemic trend of a growing labour market overall, the total level of economic activity (i.e. those either in work or looking/ available for work) is now nearly one million (980 thousand) below pre-crisis trends. We estimate that approximately one third of this ‘missing million’ is explained by a smaller population, mainly due to lower migration, while two thirds is due to higher ‘economic inactivity’ – with 310 thousand fewer older people in the labour market than we would have expected (especially older women), and 210 thousand fewer young people (especially younger men).
The fall in youth participation has been offset entirely by higher student numbers; but the fall in participation for older people has coincided with a large increase in the number of people out of work due to long-term ill health – which has reached its highest level since 2010, at 2.2 million – and more people retiring early. In total, 6.2 million people are not looking or available for work due to caring, long-term ill health or being students, with 1.3 million of these saying that they want to work.
There are also three more positive signs in today’s data - with a welcome recovery in part-time employment; a fall in in long-term unemployment for young people; and a halving in the number of people that reported being on furlough in advance of the Coronavirus Job Retention Scheme winding up.
Overall, our view is that the current recruitment crises that firms are reporting are large scale, widespread and risk becoming chronic – which will hold back our economic recovery and start feeding through into higher inflation. Shortages are being driven by a sharp increase in demand but also by large falls in labour supply. With the Plan for Jobs having helped avert an unemployment catastrophe over the last eighteen months, we now need a new and different plan, that will work with employers and wider public services to far better support older people, disabled people, those with health conditions, parents and students to prepare for and get (back) into work. This needs to start at the Spending Review this month.