Labour Market Statistics August 2024

Today’s labour market data, covering the period from April to June (just before the election), shows a slight improvement over recent month. Employment has increased marginally to 74.5%, returning to its level from three months ago. Unemployment has decreased to 4.2%, the lowest it has been since the beginning of the year. Economic inactivity, which describes individuals not available or looking for work, remains largely unchanged at 22.2%.

However, the Office for National Statistics has cautioned that falling sample sizes make the Labour Force Survey highly volatile, urging caution in interpreting short-term changes, especially in unemployment figures where the sample size is even smaller. It will take several more months to determine whether unemployment is trending up, down, or staying flat.

Employment remains stagnant, hovering around the lows seen during the pandemic's worst days. Unemployment is very low by historical standards, and economic inactivity is at its highest level in a decade. This trend continues to be driven by an increase in older individuals out of work, fewer young people in the labour force (primarily due to more being in full-time education, but also because one in ten are neither in education nor the labour force – the highest rate since at least the early 1990s), and more people of all ages not working due to long-term health conditions.

In recent months, it has been argued that weak labour market data is driven more by supply-side issues, how we help people who want to work and employers’ practices, rather than weak demand. Today’s data further supports this view:?

·????? Vacancies: Job vacancies continue to edge down but are showing signs of stabilising at around 900,000 unfilled positions, well above pre-pandemic levels. Online vacancy data also remains flat over the past year.

·????? Earnings Growth: Earnings growth remains strong, with regular pay 5.4% higher than a year ago. A more timely measure indicates that private sector pay is growing at an annualised rate of 7%, bolstered by recent increases in the National Living Wage.

·????? Unemployment: Short-term and youth unemployment remain broadly flat, serving as early indicators of weaker demand.

·????? Redundancies: Redundancies are very low, with notifications of potential redundancies to the Insolvency Service (via ‘HR1’ forms) close to record lows, indicating weaker demand.

Taken together, these factors suggest that our biggest labour market challenges are not about demand but supply, particularly regarding employment support, skills, health, and workplace practices. The new government has made significant announcements in each of these areas, but turning announcements into action and improved outcomes is a long journey.

Specifically, on employment support, including ?the proposals for a new Jobs and Careers Service, new local partnerships to support greater devolution and coordination, particularly around health, and guaranteed support for young people.

Information - ies (institute for employment studies)

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