From education to employment

Cooling labour market suggests further job losses on the way, as youth unemployment approaches 10 per cent

people stood in a line cheering with their arm in the air

A cooling labour market, with vacancies falling and youth unemployment rising to 9.8 per cent, suggest that further job losses could soon be on the way.

Read December 2022’s Labour Market Information here.

Main Points

The UK employment rate was estimated at 75.6% in September to November 2022, largely unchanged compared with the previous three-month period and 1.0 percentage points lower than before the coronavirus (COVID-19) pandemic (December 2019 to February 2020). The number of employees and part-time self-employed workers increased over the latest three-month period, while full-time self-employed workers decreased.

The most timely estimate of payrolled employees for December 2022 shows another monthly increase, up 28,000 on the revised November 2022 figures, to 29.9 million.

The unemployment rate for September to November 2022 increased by 0.2 percentage points on the quarter to 3.7%. In the latest three-month period, the number of people unemployed for up to six months increased, driven by those aged 16 to 24 years. Those unemployed for over six and up to 12 months increased, while those unemployed for over 12 months decreased in the recent period.

The economic inactivity rate decreased by 0.1 percentage points on the quarter to 21.5% in September to November 2022. The decrease in economic inactivity during the latest three-month period was driven by those aged 16 to 24 years and those aged 50 to 64 years. Looking at economic inactivity by reason, the quarterly decrease was driven by those inactive because they are students, long-term sick, or retired.

The redundancy rate has increased to 3.4 per thousand employees in September to November 2022 but remains low.

The number of vacancies in October to December 2022 was 1,161,000, a decrease of 75,000 from July to September 2022. Despite six consecutive quarterly falls, the number of vacancies remains at historically high levels. The fall in the number of vacancies reflects uncertainty across industries, as survey respondents continue to cite economic pressures as a factor in holding back on recruitment.

Growth in average total pay (including bonuses) and regular pay (excluding bonuses) among employees was the same at 6.4% in September to November 2022; for regular pay, this is the strongest growth rate seen outside of the coronavirus pandemic period. Average regular pay growth for the private sector was 7.2% in September to November 2022, and 3.3% for the public sector. Outside of the height of the coronavirus pandemic period, this is the largest growth rate seen for the private sector.

In real terms (adjusted for inflation) over the year, total and regular pay both fell by 2.6%. This is slightly smaller than the record fall in real regular pay we saw in April to June 2022 (3.0%), but still remains among the largest falls in growth since comparable records began in 2001.

There were 467,000 working days lost because of labour disputes in November 2022, which is the highest since November 2011.

Read the full Labour Market Overview here.


  • The unemployment rate remains low (3.7%) by historical standards.
  • There 29.9 employees on payrolls in December 2022, almost 900,000 above pre-pandemic levels.
  • As set out at the Autumn Statement, the Department for Work and Pensions will thoroughly review workforce participation to understand what action should be taken on increased economic inactivity, which will conclude in early 2023.
  • Monetary policy is the responsibility of the independent Bank of England. The government remains fully committed to the Bank’s independence, and the inflation target of 2%.
  • In addition to the Energy Price Guarantee this winter, which is saving the average household £900 on energy bills, the government provided £1200 worth of support to the most vulnerable households for 2022-23:
    • £650 in cost of living payments; 
    • £400 through the Energy Bill Support Scheme; 
    • £150 Council Tax rebate; 
    • Additional support for pensioners and those claiming disability benefits. 
  • The government has announced further support on the cost of living in 2023-24, targeted at those most in need:
    • UK households on means-tested benefits will receive a further £900 Cost of Living Payment; 
    • Pensioner households across the UK will receive an additional £300 Cost of Living payment; 
    • People across the UK on non-means-tested disability benefits will receive a further £150 Disability Cost of Living payment, to help with the additional costs they face. 
  • We have extended the Household Support Fund for another year in England, with £1 billion of extra funding (including Barnett funding for the devolved administrations). 
  • The government has introduced changes to the Energy Price Guarantee (EPG), building on the measures already announced which provided much needed support to domestic and non-domestic users. The action taken on Energy support at the Autumn Statement will reduce the fiscal impact of the package whilst saving the average UK household £500 in 2023-24 from a £3000 Energy Price Guarantee.

Resolution Foundation’s Analysis

The UK labour market was tight in late 2022, prompting nominal private sector growth to grow at its fastest rate outside of the pandemic (7.2 per cent) since records began in 2001. The huge gap with nominal public sector pay growth (growing by just 3.3 per cent) helps to explain why industrial unrest is mounting in the public sector.

Double-digit inflation meant that real wages fell by 1.9 and 5.5 per cent respectively in the private and public sector, with pay packets set to continue shrinking until the second half of 2023.

However, there are clear signs that the labour market is at a turning point and starting to cool, says the Foundation.

The number of job vacancies has fallen for the seventh consecutive month to 1.16 million, while overall unemployment (up to 3.7 per cent) and redundancies (rising for the past 6 months, now to 97,000) both ticked up in the three months to November.

The rise in unemployment has been driven entirely by 18-24 year olds, with youth unemployment rising from 7.5 to 9.8 per cent.

The Foundation notes too that the UK workforce is still significantly smaller than it was pre-pandemic – down by around 412,000. Encouraging participation among these ‘lost workers’ is going to prove a major challenge for government, says the Foundation.

IES Analysis

Today’s headline estimates of employment, unemployment and economic inactivity are all identical to those published last month. However underneath this we do see some signs of change in the labour market.In potentially positive news, economic inactivity due to long-term ill health, early retirement and studies appear to be falling slightly, although economic inactivity due to long-term ill health remains well above its pre-pandemic levels. Economic inactivity due to early retirement is now back to where it was before the pandemic, illustrating that the challenges that we are now facing are primarily around fewer people entering work rather than more people leaving it.

However in more worrying signs, redundancies continue to rise (albeit so far only back to pre-pandemic levels), unemployment of less than a year is rising, and the number of young people outside of full-time education or employment is also up. Vacancies continue to fall back. It is possible that for each of these we are simply seeing things returning more towards normal, but it is perhaps more likely that these are early signs of a wider slowdown.

We have also this month included new analysis of the work intentions of those who are economically inactive. Overall, 1.7 million people (around a fifth of all of those who are economically inactive) state that they would like a job at the moment, including 560 thousand of those with long-term health conditions. Additional analysis by IES and included in this briefing also finds that among those who do not want a job right now, there are more than 300 thousand people with long-term health conditions who state that they will definitely or probably work again in the future. Among those out of work due to caring responsibilities, 390 thousand want a job now while a further three quarters of a million expect to work again in future.

On pay, nominal wages continue to rise strongly (up by 6.7% on the year) but inflation continues to more than offset this, with real terms pay down by 2.4%. And public sector pay continues to fare particularly poorly, rising again by less than 4%. This is undoubtedly contributing to the continued high vacancies in public services and to wider recruitment and retention challenges.

Overall, today’s labour market data paints a worrying picture, continued unmet demand for labour that is holding back growth and could be contributing to higher inflation, but also signs of a slowdown and potential weakening in the labour market in the coming months. The government’s review on workforce participation is therefore welcome, but needs to focus on ‘active’ labour market measures to improve support for those who are out of work and want a job as well as more ‘passive’ measures affecting the tax and benefits systems.

In particular, we need to do more to extend access to employment support through the services that people use, delivered in the ways that they want, and delivering the support that they need. As we have said previously, in our view this should include as a minimum broadening access to the Restart Scheme and bringing forward commissioning of support through the Shared Prosperity Fund. We also need to work better with employers, and expect more from them – on making work more flexible and accessible, improving and simplifying recruitment, and providing greater security and support for those returning to work.

Sector Response

Chancellor of the Exchequer, Jeremy Hunt, said:

“Even in the face of global economic challenges, the UK labour market remains resilient with a record number of employees on payrolls.

“The single best way to help people’s wages go further is to stick to our plan to halve inflation this year. We must not do anything that risks permanently embedding high prices into our economy, which will only prolong the pain for everyone.”

Minister for Employment, Guy Opperman MP said:

“It is positive to see more people moving into jobs or taking steps to search for work.

“Helping people to secure a reliable income is a priority as we start this year. Across our jobcentres we provide one-to-one tailored support for every jobseeker, breaking down barriers for those thinking about re-entering the workforce, such as older workers or those who have been out of work due to ill health.

“We know the challenges people are facing with the cost of living and have already provided substantial support to help with rising bills, while millions of vulnerable households will continue to be supported with up to £1,350 in additional direct cash payments over the next financial year.”

Matthew Percival, the CBI’s Director for People and Skills, said:  

“The continued evidence of younger and older workers returning to employment is welcome news. There are early signs of softening in the labour market, but many businesses are still struggling to hire and record pay growth is not yet easing the cost of living crisis.” 

“The Government needs to pull every lever to ease shortages and strengthen the case for the business investment that is needed to drive growth and living standards. This means helping more people to overcome the barriers like the cost and availability of childcare or ill-health that are preventing them from working, and updating the Shortage Occupations List.“ 

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

“Today’s figures underline why we are seeing such a level of discontent amongst public sector workers, and why many continue to be concerned regarding the economic outlook for 2023. 

“Inflation continues to cancel out wage rises with real pay down 2.6% on the year, and this is most harshly felt by the public sector workforce who are receiving increases of just 3.3% compared to 7.1% in the private sector. It’s vital that Ministers recognise the pressures facing public sector workers and urgently resolve pay disputes so that yet more days are not lost to strike action.

“The UK employment rate is 1.0 percentage points lower than before the pandemic and economic inactivity remains higher. While both main parties have begun to set out ideas to support more people into jobs, there is no magic tap to increase the size of the UK workforce or improve the quality of jobs on offer. Doing so requires long-term investment and reform, including more cross Government action to make employment services more inclusive and effective, and an Employment Bill to strengthen worker rights and protections.”

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.”

Nye Cominetti, Senior Economist at the Resolution Foundation, said:

“Private sector pay growth surged in late 2022 as a result of a tight labour market, though with inflation still in double-digits it has not been enough to prevent pay packets from shrinking.

“But the labour market is now at a turning point, with vacancies falling, and rising unemployment concentrated among young people.

“Looking ahead, the labour market stories of 2023 are likely to the return of rising unemployment, followed later in the year by the far more welcome return of real wage growth.”

TUC General Secretary Paul Nowak said: 

“Workers have been losing hundreds of pounds from their annual pay over the last year. But in the public sector, Conservative ministers are dragging their heels on meaningful negotiations. That’s why staff have had no choice but to use their right to strike to defend their pay.

“The Conservative government will not resolve pay disputes by rushing in new laws that attack the right to strike. The best way to settle disputes is around the negotiating table – and with credible pay offers that protect workers from rising prices.”

David Morel, CEO, Tiger Recruitment

“Steady and more balanced is the best way to describe the UK jobs market, as per the latest ONS statistics.

Encouragingly, the number of employees on payrolls in December is up on the previous month and on the same period last year. Wages also rose by an annual 6.4% from September to November, which is below inflation but the largest increase in pay since records began in 2001.

However, reflecting the current economic uncertainty, there are a few clouds on the horizon. These include a slight rise in the rate of unemployment and a drop in the number of vacancies from July to September as employers tighten their belts. The redundancy rate has also increased to 3.4 per thousand employees, but remains low and is likely to stay that way.

Overall, today’s figures and our projections for 2023 point to a robust jobs market that stands firm against recessionary pressures. The pandemic highs are gone, replaced with a more corrective period. Employers aren’t hiring with the same urgency as last year while employees are no longer resigning in their droves. This means an improved ratio of jobseekers to vacancies, resulting in a more favourable outlook for employers looking to hire, which I hope will continue throughout the year ahead.”

James Reed CBE, Chairman of, said:

“Looking at our data from the first two weeks of 2023, we see that total job postings on the site are down 25 per cent in comparison to the same period last year. At the same time, however, applications from candidates are on the rise — increasing by 20 per cent YoY.

“While the hiring activity of many businesses continues to dip below the record number of vacancies seen during the 2022 ‘jobs boom’, the career opportunities currently available continue to turn the heads of many candidates. In fact, in sectors such as IT & Telecoms, Sales and Engineering we saw a growth in jobs postings – rising by 20 per cent, 46 per cent and 20 per cent MoM respectively.

“The biggest sector moves YOY are in social care, health & medicine, and IT & Telecoms – which have seen job postings decrease by 55%, 52% and 27% respectively. With the NHS under increasing pressure, we hope to see additional investment channelled into health & medicine over the coming months to protect jobs and encourage more talent into the sector.

“Despite strong economic headwinds, the labour market remains stubbornly buoyant with no signs of the mass redundancies and layoffs typically associated with past recessions. In fact, in this ‘unconventional recession’, it is more likely we will see ‘labour hoarding’ from businesses keen to hold onto the talent needed to support growth when the economy begins to recover.

“Likely driven by the cost-of-living crisis, many people have opted to start their job hunting early in January in order to secure a pay bump and achieve greater financial security for the challenging year ahead. Many likely sense that a window of opportunity exists and while it may be wide open at the moment, it could begin to slowly close over the course of 2023.”

Walid Koudmani, Chief Market Analyst at online investment platform comments:

“UK labour market data for November was released today at 7:00 am GMT and it was mostly in-line with estimates with the unemployment rate staying unchanged at 3.7% (exp. 3.7%) while core wage growth accelerated from 6.1 to 6.4% YoY (exp. 6.3% YoY). This could further encourage the BoE to continue its policy as we see more central banks keep a close eye on labour data. Meanwhile, despite inflation showing some signs of slowing, it remains a key issue for businesses and consumers to contend with and one which must be addressed by the government and BoE. The FTSE100 is extending the downward move and is approaching yesterday’s lows which could be considered a support to keep an eye on for the time being. On the other hand, the Pound is gaining with GBPUSD pair breaking through and trading above the 1.22 mark as the pair continues its strong performance.”

Neil Carberry, Chief Executive of the Recruitment & Employment Confederation (REC), said:

“Today’s official labour market data confirms the trends that business surveys have been suggesting for some time. Demand for workers is still higher than pre-pandemic, which combines with candidate shortages to make hiring workers a challenge. Slower economic performance and high inflation is starting to slow this trend, but it has not reversed. High inflation and a tight labour market have also fed into higher pay for existing and new staff, a challenge to companies who are facing rising costs across the board. At an unpredictable time, it is also no surprise to see firms dipping into the UK’s world-leading temporary work market for short-term access to key skills.

“For businesses, this report confirms the need to keep investing in getting hiring right because even in a slower economy we are likely to still have a tight labour market. Working with a professional recruitment partner Is an essential part of that. For governments, supporting people into work from inactivity must be a priority – but that must be tied to a wider plan for long-term growth and workforce sustainability.”

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