Labour Market Statistics, September 2023
Bad news has come in three in today’s main labour market data – with employment falling sharply, a similarly large rise in unemployment, and an uptick in economic inactivity. The bad news does not end there either – with the number of young people neither in employment nor full-time education increasing by more than a quarter in the last year alone (to more than one million, or nearly one in six of all young people); signs that rising short-term unemployment is now feeding through into longer-term unemployment; another record set for the number of people out of work with long-term health conditions; and vacancies falling by more than 20% over the last year.
For all of that bad news, though, today’s pay data is more positive. Nominal pay growth is again around 8% year-on-year, which combined with falling inflation means that regular pay in real terms has grown by just over 1%. This is starting to unwind some of the damage caused by high inflation over the last year or so, but it is only a start – with pay packets on average only around £5 a week higher than they were before the pandemic which in turn had only just reached the level they were at on the eve of the 2008 recession.
Today’s briefing includes extra analysis on youth participation given the concerning growth in the number outside of employment and learning. We have also included some discussion and analysis of overall labour market tightness and efficiency, which shows that there is now significantly more slack in the labour market than there was a year ago but also some signs that the labour market may be a bit less efficient than it was. Vacancies remain very high (with close to one million unfilled jobs) and employment is still well below where it was before the pandemic began, so there is more that we can do to help support economic growth, higher employment and better living standards.
Nonetheless, today’s figures overall are weaker than we had expected, which likely increasingly reflects a cooling in the economy as much or more than inefficiencies in the labour market. If that is the case, then we should also expect nominal pay growth to slow in the coming months (as this tends to lag other indicators). This may well give more cause for the Bank of England to consider holding fire on further interest rate rises, at least until some of this picture becomes clearer and the effects of the large rises since last August start to feed through.
At the same time, as we have said in previous briefings, the labour market data continues to show that we cannot fix our problems solely through monetary and fiscal policy on the demand side – we need to do far more on the supply side too. With the Autumn Statement (budget) now just two months away, we need to be doing everything that we can to help people who want jobs to find and take up the jobs that want people. This should include improving access to employment support – for example by enabling more people to access appropriate help through Jobcentre Plus and extending the Restart Scheme; addressing skills shortages, for example through reform of the Apprenticeship Levy and greater flexibility to meet local needs; and a much more coherent offer for employers – so that they can access (and know where to go for) help with inclusive recruitment, training, flexible job design and workplace support.