From education to employment

April 2024 ONS Labour Market – A Record High of People Economically Inactive – Sector Response

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2.8 million people are economically inactive due to long-term sickness, a record high.

Main points

Payrolled employees in the UK fell by 18,000 (0.1%) between January and February 2024, but rose by 352,000 (1.2%) between February 2023 and February 2024.

The early estimate of payrolled employees for March 2024 decreased by 67,000 (0.2%) on the month but increased by 204,000 (0.7%) on the year to 30.3 million. The March 2024 estimate should be treated as a provisional estimate and is likely to be revised when more data are received next month.

Increased volatility of Labour Force Survey estimates, resulting from smaller achieved sample sizes, means that estimates of quarterly change should be treated with additional caution, and we recommend using them as part of our suite of labour market indicators, alongside Workforce Jobs, Claimant Count data, and Pay As You Earn (PAYE) Real Time Information (RTI) estimates.

In December 2023 to February 2024, the UK employment level (for those aged 16 years and over) is down on both the year and the quarter.

The UK employment rate (for those aged 16 to 64 years) was estimated at 74.5% in December 2023 to February 2024, below estimates of a year ago and decreased in the latest quarter.

The UK unemployment rate (for those aged 16 years and over) was estimated at 4.2% in December 2023 to February 2024. The unemployment rate is above estimates of a year ago (December 2022 to February 2023) and up in the latest quarter.

The UK economic inactivity rate for those aged 16 to 64 years was 22.2%, above estimates of a year ago (December 2022 to February 2023), and up in the latest quarter.

The UK Claimant Count for March 2024 increased by 10,900 on the month and by 57,400 on the year to 1.583 million.

In January to March 2024, the estimated number of vacancies in the UK fell by 13,000 on the quarter to 916,000. Vacancies fell on the quarter for the 21st consecutive period but are still above pre-coronavirus (COVID-19) pandemic levels.

Annual growth in employees’ average regular earnings (excluding bonuses) in Great Britain was 6.0% in December 2023 to February 2024, and annual growth in total earnings (including bonuses) was 5.6%.

Annual growth in real terms (adjusted for inflation using the Consumer Prices Index including owner occupiers’ housing costs (CPIH)) for regular pay was 1.9% in December 2023 to February 2024, and for total pay was 1.6%.

There were an estimated 106,000 working days lost because of labour disputes across the UK in February 2024. The health and social work industry showed the most working days lost in February 2024.

Check out previous labour market stats here

Resolution Foundation’s response

Britain’s jobs recovery falls further off course as employment falls, and inactivity rises

The UK’s post-pandemic jobs recovery has fallen further off course, as employment and payrolled jobs both fell, while working-age economic inactivity reached its highest level since 2015, the Resolution Foundation said today (Tuesday) in response to the latest ONS labour market statistics.

The UK is currently the only G7 economy yet to return to its pre-pandemic employment rate (of 76.2 per cent), and the latest data showed further signs of a struggling jobs market.

The number of job vacancies fell for the 21st consecutive month, while unemployment nudged up to 4.2 per cent, and employment fell to 74.5 per cent in three months to February. More up-to-date data from the PAYE system shows that payrolled employment also fell in March – the first time outside the pandemic that this measure has fallen for two consecutive months (although the latest month is often revised).

As well as a deterioration in the number of people in work, the number of people completely out of the labour market continued to rise, with the economic inactivity rising to its highest level since 2015 among working age people.

This rise is broad based – the inactivity rate is up (and the employment rate down) for all age groups except those aged 35-49, and in all English regions outside London and the South East.

The number of people inactive because of ill health has hit a new record high of 2.8 million, while there has been a worrying increase in the number of people who don’t want a job – the number of inactive who want a job is at its lowest since Mar-May 2022.

The only silver lining is that among those still in work, regular real wages grew in the three months to February by a healthy 2.1 per cent.

Charlie McCurdy, Economist at the Resolution Foundation, said:

“Britain post-pandemic jobs recovery has fallen further off course, with falling employment adding to the longer-term rise in economic inactivity.

“Rising redundancies and falling job levels are signs of a stagnant economy, while rising inactivity and long-term sickness suggest there are wider issues with the health of our workforce.

“Tackling rising inactivity – and its impact on the public finances, the benefits system, and people’s wider health and wellbeing – is one of the biggest economic challenges facing both this government, and whoever wins the next election.”

Sector Response

Secretary of State for Work and Pensions, Mel Stride MP said:

“We’ve seen long term sickness related inactivity rise since the pandemic, that’s why we introduced our £2.5bn Back to Work Plan to transform lives and grow the economy.

“Our welfare reforms will cut the number of people due to be placed in the highest tier of incapacity benefits by over 370,000 – people we will now be helping back to work.

“With real wages up again and millions benefiting from this month’s huge boost to the National Minimum Wage, it is work, not welfare, that delivers the best financial security for British households.”

Ben Harrison, Director of the Work Foundation at Lancaster University, said:

“Although the ONS advises caution due to increased volatility in their data, today’s statistics suggest it is too early to talk about the UK economy turning a corner.

“Our workforce is sicker and poorer as economic inactivity has risen further to 9.4 million, and unemployment has risen to 4.2%, which is up on the latest quarter and 0.3 percentage points higher than this time last year.

The UK workforce is an international outlier as long-term sickness hits new record

“A record 2.82 million people are economically inactive due to long-term sickness, and the UK is facing unresolved structural issues with labour market participation, as employers aim to fill 916,000 vacancies. The UK continues to be an international outlier with participation rates below pre-Covid levels. Since December 2019 to February 2020, 717,000 people have become economically inactive due to ill health and the tide is not turning.

“As we get closer to a General Election, supporting more people who are long-term sick into secure and sustained employment will be one of the central challenges of the next Government. Policy-makers must look beyond short-sighted approaches that focus on getting jobseekers into ‘any job’. Instead, they must look to improve the quality of the jobs on offer, look at preventative measures that stop sick workers falling out of the labour market and scale up the availability of health and occupational support services to support those who have fallen out of work back into secure, long-term employment.”

Real term wages increase for some, but UK remains in 18 year pay squeeze

“Average regular wages grew by 6% on the year. With inflation falling below 4%, this represents a 1.9% real pay rise for workers and the ninth consecutive month that real pay for workers has risen. However, pay growth in construction is lagging behind inflation at 3.1%.

“The UK is still in an 18 year pay squeeze with the OBR predicting real wages won’t return to 2008 levels until 2026. This squeeze impacts the 6.8 million people in severely insecure jobs most, who are particularly vulnerable to living cost increases.”

Stephen Evans, chief executive at Learning and Work Institute, said:

“The labour market continues to ease with falls in employment and rises in unemployment and economic inactivity. Most troubling is that the UK is the only G7 country where employment remains lower than pre-pandemic levels. This is driven by rises in economic inactivity, with 2.8 million people economically inactive due to long-term sickness, a record high.

“The answers are to get the economy growing and offer more and better help to find work to people who are economically inactive. The number of people economically inactive due to long-term sickness who get help to find work each year is only half the number who want a job. That needs to change.”

TUC General Secretary Paul Nowak said:

“Working people have suffered the longest pay squeeze in more than 200 years thanks to the Conservative government.

“Living standards are still on the floor. And now unemployment is rising – a real worry for families needing work and young people looking for their first job.

“We need a fresh start with a proper plan for jobs and growth to make sure family incomes can recover and everyone feels secure at work.”

On a new record high for people out of work due to long-term sickness, Paul added:

“NHS waiting lists are near record levels. But instead of taking responsibility, the Tories are attacking people who are too sick to work. The nasty party is back!

“Our NHS is crying out for the investment needed to get waiting lists back down. When people can access treatment faster, they will return to work sooner.”

Jack Kennedy, Senior Economist at the global hiring and matching platform, Indeed, commented:

The labour market continues to gradually cool but continued high wage growth underlines concerns over inflation persistence. Today’s ONS figures show regular pay growth inching down but remaining elevated at 6.0% year-on-year in February. 

Similarly, Indeed data shows posted wage growth for new hires still running hot at an annual 6.2% rate in March, led by lower-paid categories where worker shortages remain high. The UK continues to see much stronger posted wage growth than the euro area (3.7%) and double that in the US (3.1%). 

The risk of UK inflation proving more persistent than in the US, partly driven by labour market factors, was cited last week by MPC hawk Megan Greene. With stubborn US inflation having dimmed hopes of an imminent Fed rate cut, prospects for UK rate cuts being cut before autumn also look questionable.

The Recruitment and Employment Confederation (REC) Chief Executive Neil Carberry, said:

“Today’s figures capture a labour market that has slowed with the economy, though activity levels overall remain relatively robust with vacancies still high. With business surveys predicting demand for both permanent and temporary workers to pick up in the near term, this looks like something of a soft landing.

“While overall pay growth remains high, there are signs of softening in the underlying data that we would expect to increase in pace as large 2023 pay awards continue to fall out of the data over the next couple of months. Sectors affected by the latest National Living Wage increase will not see this, however, and this is likely for be a significant challenge. Employers in these sectors have faced a long tough period since the pandemic in terms of wage and goods price inflation, the cost of Covid loan repayments, labour shortages and price pressure from customers.

“Getting the labour market right matters to driving sustainable growth. That’s why The REC has called for a new approach to workforce from Government, based on strong evidence. Tackling barriers on skills, support infrastructure like childcare and transport, regulation and tax. It is time for politicians to really listen to business on what works to tackle inactivity and drive growth. Put the economy first, so it can support lower taxes and better public service funding.”

Michael Stull, managing director of ManpowerGroup UK, said:

“The UK labour market increasingly resembles an iceberg. The latest ONS data released today represents the visible tip, which is starting to show the issues UK businesses face in the economy and labour market, with a rise in unemployment and inactivity again this month. If left unchecked, the various challenges present formidable obstacles to future economic growth and competitiveness. Addressing the longstanding skill gaps evident across multiple industries and getting more young people into the workforce, should be priorities for UK plc. Tackling the lack of capacity across the NHS, which is driving up long-term sickness rates amongst working-aged people and exploring incentives and mechanisms by which people aged 55-plus can remain in work and/or assist with mentoring and skills transfer, are further examples which must be addressed if we hope to make improvements in productivity rates.

“Whilst it would be reductive to look at any single data point and draw too many conclusions right now, today’s ONS numbers provide an opportunity to challenge prevailing ‘inactivity’ stereotypes and explore more inclusive pathways for skills and career development. Where and how new technologies can be used is also important in order to unlock potential, drive innovation and better capitalise on growth prospects as economic performance slowly moves into more positive territory over coming months.”

Rosalind Gill, Head of Policy and Engagement at the National Centre for Universities and Business (NCUB) said:

“New figures released today reveal a worrying increase in the economic inactivity rate, especially driven by young people. Alongside this however, and more concerning still, the level of vacancies is still higher than pre-pandemic. There are signs therefore, that employers across a range of sectors are currently facing difficulty in hiring. Businesses and higher education providers are sharing serious concerns that we are now contending with a skills mismatch.”

Gill concluded: “We urge the Government to implement a comprehensive plan engaging all stakeholders: including education, training, and business sectors. Without assistance, the skills mismatch will continue, and employers will lose out on the innovative, talented workforce they crucially need to grow. As technology continues to advance, the labour market is transforming, and the skills gaps will only become more acute. Failing to address this now may worsen skill gaps and unemployment to unsalvageable levels, impeding our nation’s economic growth and resilience. Urgent action needs to be taken to reverse this worrying trend, and to help people who want to play a crucial role in our economic recovery.”

Jonathan Firth, VP Recruitment Solutions at LHH: 

“Coupled with a slightly lower employment rate and a dip in the number of vacanciesfor the 21st consecutive period, the latest ONS data paints a picture of evolving dynamics in our workforce landscape, signalling a need for adaptability and strategic talent acquisition. 

“Talented individuals not only contribute to innovation and productivity but also play a crucial role in steering companies through turbulent times. Businesses need to prioritise attracting top talent and invest in initiatives to showcase their unique value propositions to potential candidates. As the competition for skilled professionals intensifies, companies must differentiate themselves as employers of choice.  

“This involves not only offering competitive compensation packages and flexible working arrangements, but also fostering inclusive workplace cultures that promote growth and development – particularly as in 2022, only 54% of global workers stated that they were satisfied with their career development opportunities.” 

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