January 2023

Dr Helen Gray, chief economist at Learning and Work Institute, said:
Although there have been recent signs that cost-of-living pressures have reached their peak, pay fell by an average of 2.6 per cent in real terms in the most recent quarter, one of the largest reductions in pay growth since comparable records began in 2001. Public sector workers continue to be hardest hit, with nominal total pay 3.9 percentage points lower in the public sector compared with the private sector in the quarter to November 2022. The number of days lost to industrial action continues to rise, reaching nearly half-a-million days in November. Whilst this has not yet exceeded the levels seen in Nov 2011, at the height of disputes about public sector pension reforms, the figures do not currently include the wave of strikes seen across the public sector in December and January. In the context of ongoing cuts to the standard of living, industrial unrest is likely to continue for some time to come. More welcome news is the small drop in the rate of economic inactivity, continuing the downward trend seen in last month's figures. In the quarter to November this change was largely due to increased participation in the labour market by 18-24 and 50-64 year olds. However, the rate of economic inactivity remains 1.3 percentage points higher than before the pandemic. More must be done to return employment levels to those seen in February 2020 if there is to be any hope of employers filling nearly 1.2 million vacancies.
Explore the full briefing

1. Over 1 million working days lost to strikes in the three months to November 2022

November saw the highest level of industrial action in 11 years, with 467 working days lost due to strikes. This is likely rise further, given ongoing industrial disputes in December and January and strikes planned for the months ahead. However, days lost due to strikes remain well below historic levels seen in  the 1970s and 1980s.



2. Real earnings continue to fall due to high inflation

The latest data show average regular earnings grew by 6.4% in the year to November 2022 – however this is mostly driven by private sector pay. For public sector workers average regular earnings grew by 3.3%, while average regular earnings grew by over twice that (7.2 %) for private sector workers. However, high inflation means real wages have now fallen by 2.4% in the year to November 2022. Further falls are likely while inflation remains high, although there are signs inflation may be peaking, with CPIH inflation decreasing from 9.6% in October to 9.3% in November.





3. Employment is relatively flat and remains 292,000 below pre-pandemic levels

Employment increased moderately again by 27,000 in September to November2022 compared to the previous quarter but still remains 292,000 lower than before the pandemic.

Unemployment increased by 56,000 in September to November 2022 compared to the previous quarter but is 120,000 lower than pre-pandemic.

Economic inactivity fell by 55,000 compared to the previous quarter but is still 575,000 higher than its pre-pandemic level. Over 8.9 million people aged 16-64 are economically inactive, over 2.6 million of whom say this is due to sickness or disability (long or short term), 15% higher than pre-pandemic. Our research shows the UK is an international outlier in seeing this rise in economic inactivity, highlighting the need to extend employment support and widen our labour force.

There is some evidence that the job market is cooling, with vacancies in October to December down by approximately 140,000 on their 2022 peak (1.3 million to 1.16 million).





4. There are fewer potential workers for employers to recruit, with 635,000 fewer over 50s in the labour market since the pandemic started

Recruitment is more challenging for employers because of rises in economic inactivity – people leaving the labour market. This has been primarily driven by those aged 50 and over and people with long-term health problems and disabilities. The number of people aged 50-64 who are economically inactive has increased by 9.5% since the pandemic started.

This is a key challenge – for the Government to support people in this group who want to work and for employers to think about recruitment and job design that will meet their needs. However, inactivity for those aged over 50 has decreased slightly. The number of over 64s who are economically inactive fell by 11,000 to just under 11 million in September to November 2022 compared with the previous quarter, and the number of 50-64 year olds who are economically inactive decreased by 67,000, from approximately 3.6 million to 3.54 million. It may be that the cost of living crisis is leading people to rethink whether they want or need to work.





5. The employment picture varies across the country

Employment rates this quarter are higher than the equivalent pre-pandemic quarter in 2019 in the North East, Yorkshire & the Humber, and Scotland, but are lower everywhere else. Economic inactivity this quarter is higher than the equivalent pre-pandemic quarter everywhere except Yorkshire & the Humber and Scotland. This varying picture, which is even greater at sub-regional level, shows the importance of tackling inequalities so everyone has a fair chance in life wherever they live.




Subscribe to our newsletter to get sent our in-depth labour market analysis each month