November 2023
For the second month running, uncertainties created by falling response rates to the Labour Force Survey mean the Office for National Statistics has released a more limited set of data, adjusted in line with trends in administrative data like HMRC PAYE data and the claimant count of unemployed people. However, these administrative data have their own challenges. Significant caution should therefore be exercised in the use of these statistics until a new Labour Force Survey and revised population projections are in place in 2024.
Stephen Evans, chief executive at Learning and Work Institute, said:
The ONS has again released a limited set of data due to low survey response rates, making it difficult to assess the current picture. But most signals point towards a flattening labour market, with vacancies continuing to fall and most measures of employment little changed. Real earnings are growing again as inflation falls, but fastest in sectors like finance and still £12,000 lower than if pre-financial crisis trends had continued. The big picture remains of weak growth in the economy and real earnings, with employment historically high but wide gaps between groups and areas. That's the backdrop for the Chancellor's Autumn Statement.
Helen Gray, chief economist at Learning and Work Institute, said:
Once again, this month's release of labour market data is more limited than usual as the ONS adjust their approach to estimating economic activity. In September 2023 total real average weekly earnings rose by 1.4 per cent on a year earlier using the preferred quarterly measure. However, this follows an extended period, prior to Summer 2023, when pay was declining in real terms.
Vacancies have now fallen continuously since the March to May 2022 quarter, but remain above pre-pandemic levels. Meanwhile, an additional 357,000 people are economically inactive compared with before the pandemic. Although the labour market is relatively stable at present, without action to address the reasons for economic inactivity, employers are likely to face continued upward pressures on wages.
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1. Headline indicators
Employment in September is up by 11,000 on the previous month and up by 54,000 on the April to June 2023 quarter, to 32,984,000. The employment rate for those aged 16 to 64 remains the same at 75.7%, compared with the last quarter.
Economic inactivity for those aged 16 to 64 is up by 33,000 on the previous quarter to 8.73 million. The economic inactivity rate remains the same at 20.9%.
Unemployment (for those aged 16 to 64) rose by 9,000 compared with the previous quarter, to 1.42 million. As with the employment and inactivity rates, the unemployment rate for July to September 2023 was unchanged on the April to June 2023 quarter, at 4.3%.
2. Real wages rose slightly as inflation slows, but remain well below pre-financial crisis trends
The latest data show average regular earnings grew by 7.7% in the year to September 2023. For public sector workers average regular earnings grew by 7.3%, while average regular earnings grew by 7.8% for private sector workers. The slowing rate of inflation means real regular earnings went up by 1.3% (3-month average change) in the year to September 2023, with the single month data for September showing an increase of 1.0% over the year. Inflation has remained largely unchanged in recent months – CPIH decreased very slightly from 6.4% in July to 6.3% in August and stayed at 6.3% in September. Core CPIH (excluding energy, food, alcohol and tobacco) in the year to August 2023 was 5.9%, down from 6.4% in July. It remained at 5.9% in the year to September 2023. Also, inflation in areas like food and non-alcoholic beverages is still very high. Inflation in the UK remains above that in other countries in the G7. The United States is currently experiencing an inflation rate of 3.7% while the Eurozone average is currently 4.3%. Weak growth since the global financial crisis means average earnings are around £12,000 per year lower than if pre-crisis trends had continued.
3. There are fewer potential workers for employers to recruit, with 613,000 fewer over 50s in the labour market since the pandemic started
Recruitment has been more challenging for employers since the pandemic because of rises in economic inactivity – people leaving the labour market. The number of people aged 50 to 64 who are economically inactive has increased by 8.5% since the pandemic started.
Economic inactivity has been stable in the most recent quarter, with no change in the rate in July to September 2023 compared with April to June 2023. But the challenge remains: the number of those aged 16 to 64 who are economic inactive is 357,000 higher than pre-pandemic, yet only one in ten out-of-work older people and disabled people get employment support each year. The Government needs to extend employment support to more people outside the labour market and employers need to think about recruitment and job design to attract and retain staff.
4. Vacancies are falling, but remain high by historic standards
Headline vacancies this month stand at 957,000, down by 58,000 compared with the previous quarter. The ONS’ experimental single-month vacancy figure has fallen by 30,000 over the past month. The headline ONS vacancy figure is both seasonally adjusted and a three-month average.
5. Numbers claiming unemployment-related benefits continue to exceed ILO measure of unemployment
Recent adjustments to the Labour Force Survey to align with other sources have closed the sizeable gap between the numbers claiming unemployment-related benefits and those unemployed on the official measure. Unemployment is 1,448,000, up by 4,000 from last month’s published level, and the quarterly headline figure has risen by 9,000. The ONS figure for claimant unemployed was 1,568,000 in October, up by 18,000 on the previous month and a similar amount on the quarter. In September 2023 the number of unemployed people who were claiming unemployment-related benefits was 102,000 higher than the number unemployed on the official measure.
6. Unemployment rate much higher for young people than for those aged 25+
Of those who are economically active, the unemployment rate is 12.6% among 16-to-24-year-olds. The rate for those aged 25 to 34 is 3.9%, whilst it is 2.7% for those aged 35 to 49. For those aged 50 to 64 the unemployment rate is 2.9% and for those over 65 years of age it is 2.0%. In the most recent quarter, the unemployment rate rose by 0.2 percentage points for 16-to-24-year-olds compared with April to June 2023, but remained unchanged for all other age groups.
