From education to employment

“Flat” labour market but signs of slowdown may be starting to emerge

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Employment, unemployment and economic inactivity all broadly stable, but short-term unemployment and redundancies are highest this year while vacancies starting to fall. With still more than a million vacancies and three million people out of work who want a job, we need to do far more to help people back into work

Main points

The UK employment rate for August to October 2022 increased by 0.2 percentage points on the quarter to 75.6% but is still below pre-coronavirus (COVID-19) pandemic levels. Over the latest three-month period, the number of employees increased, while self-employed workers decreased.

The most timely estimate of payrolled employees for November 2022 shows another monthly increase, up 107,000 on the revised October 2022 figures, to a record 29.9 million.

The unemployment rate for August to October 2022 increased by 0.1 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, and this increase was seen across all age groups.

The economic inactivity rate decreased by 0.2 percentage points on the quarter to 21.5% in August to October 2022. The decrease in economic inactivity during the latest three-month period was driven by those aged 50 to 64 years. Looking at economic inactivity by reason, the quarterly decrease was driven by those inactive because they are retired.

In September to November 2022, the estimated number of vacancies fell by 65,000 on the quarter to 1,187,000. Despite five consecutive quarterly falls, the number of vacancies remains at historically high levels. The fall in the number of vacancies reflects uncertainty across industries, as 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 6.1% in August to October 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 6.9% in August to October 2022, and 2.7% for the public sector; outside of the height of the pandemic period, this is the largest growth rate seen for the private sector and is among the largest differences between the private sector and public sector growth rates we have seen.

In real terms (adjusted for inflation) over the year, total and regular pay both fell by 2.7%; 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 417,000 working days lost because of labour disputes in October 2022, which is the highest since November 2011.

Read more here.

Resolution Foundation’s Analysis

Highest number of days lost to strikes in ten years but set to continue rising as public sector real wages fall

Recent industrial action has led to the highest number of days lost to strikes in October 2022 since November 2011, and this is set to rise in the coming months as labour disputes over falling real wages continue, the Resolution Foundation said today (Tuesday) in response to the ONS labour market statistics.

The largest strike action in a decade has led to 417,000 days of work being lost in October 2022. But this remains low compared to the previous peak, with the period of significant industrial action in November 2011 leading to 997,000 days being lost.

With public sector real wages falling by 5.8 per cent this month – compared to a 2.0 per cent real-terms fall for private sector wages – strike action looks set to continue over the coming months, as high inflation cuts deep into workers’ pay packets.

But while the uptick in strike action is a recent phenomenon, it comes off the back of persistent gaps between private and public sector pay. In cash terms, public sector pay has grown by the equivalent of 3.8 per cent a year since the eve of the pandemic, compared to 5.2 per cent in the private sector.

The pressure for strikes will remain as the labour market remains tight, with vacancies remaining near record highs despite five quarters of continuous falls. Other labour market quantities remained broadly flat on the month, with unemployment and employment rates remaining largely unchanged, while inactivity due to long-term sickness fell slightly.

There may be some small signs that the labour market is beginning to cool. Redundancies have risen slightly to 89,000, albeit from a very low base – they are now approaching pre-pandemic normal levels. Similarly, short-term unemployment rose by 92,000 on the quarter, from a low starting point. In broad terms, labour demand has remained flat over the last couple of months, and participation is starting to catch up, which could ease recruitment problems.

The Foundation notes that risingvacancies in the public sector will exacerbate the pressure on the Government to increase pay as it struggles to recruit workers. But early signs of cooling in the private sector could bring good news for public sector employers in the months ahead as they face less competition for workers.

IES Analysis

As with last month, today’s headline estimates for employment, unemployment and economic inactivity are broadly flat – with some signs however that employment has edged up recently, with lower economic inactivity more than offsetting a slight rise in unemployment.

The small recent falls in economic inactivity are most pronounced among people aged 50-64, which is explained by higher employment among that age group (particularly men). Early retirement and economic inactivity due to long-term ill health are both down slightly, with economic inactivity for other reasons broadly unchanged.

However if that is the good news, that’s about as good as it gets – and elsewhere there are some signs (albeit very early ones) of a wider slowdown in the economy and labour market. In particular vacancies are now falling back, down by about 9% on their peak in the early summer but still very high (at 1.19 million). Among predominantly private sector industries the fall is even greater, at around 12% – with public sector vacancies flat or rising.

As vacancy figures are a ‘stock’ measure, these falls could be explained by existing vacancies being closed rather than a slowdown in new vacancies. However this seems unlikely as today has also seen a noticeable rise in short-term unemployment (again from a very low base last quarter). And this in turn rise does not appear to be due to falling economic inactivity, as it is particularly concentrated among young people outside of full-time education. Taken together, these data suggest a slowdown in hiring, most likely due to a weakening in the economy and employer uncertainty.

There are also some worrying signs in the latest redundancy figures, which are up by about two thirds from their trough in the early summer. At about 90 thousand in the last quarter, redundancies remain very low indeed by historic standards – and there is no sign of increase in advance notices to the Insolvency Service (HR1 forms), but it is nonetheless concerning.

On pay, this month sees continued strong growth in nominal wages – up by around 6% year on year – but once again very high inflation is more than offsetting this, with real terms pay down by 3% overall. We also continue to see divergent trends between the public and private sectors, with private sector pay growth around 7% and the public sector below 4%. This is undoubtedly contributing to the continued high vacancies that we are seeing in public services, and to wider recruitment and retention challenges. In this context it seems even more unsustainable for government to be trying to hold down public sector pay awards at around 2-3% rather than the 6-7% increases that we are seeing in the wider economy.

Looking ahead, while there are warning signs in today’s data, there are also still very high vacancy levels and around three million people out of work who want a job. Our inability to meet this demand continues to hold back growth and make living standards worse. The government’s announcement of a review into how we can help more of those who are economically inactive to get into work is welcome, and in our view as a minimum needs to broaden access to the Restart Scheme and bring forward funding for the Shared Prosperity Fund. Employers need to do more too – particularly on making work more flexible by default, improving and simplifying recruitment, and providing greater security and support for those returning to work.

Sector Response

Chancellor of the Exchequer Jeremy Hunt said:

“While unemployment in the UK remains close to historic lows, high inflation continues to plague economies around the world as we manage the impacts of Covid-19 and Putin’s invasion of Ukraine.

“To get the British economy back on track, we have a plan which will help to more than halve inflation next year – but that requires some difficult decisions now. Any action that risks embedding high prices into our economy will only prolong the pain for everyone, and stunt any prospect of long-term economic growth.

“With job vacancies at near record highs, we are committed to helping people back into work, and helping those in employment to raise their incomes, progress in work, and become financially independent.”

Minister for Employment, Guy Opperman MP said:

“Today’s figures show the number of people on payrolls remains at an all-time high. But it is important that working people get the support they need to progress and boost their incomes.

“This government will always take steps to make sure work pays. We have already cut the Universal Credit taper rate and increased the work allowance, so claimants can keep more of their hard-earned money.

“Next year, we’re going further by providing tailored employment support to a further 600,000 claimants on Universal Credit who are already in work.”

Tony Wilson, Director at the Institute for Employment Studies said:

“Today’s figures are broadly flat overall. Employment remains around three hundred thousand below where it was before the pandemic, while economic inactivity is more than half a million higher. However there are also growing signs today that the labour market may be starting to slow down. Vacancies are now down by nearly ten per cent from their peak in the summer, short term unemployment is now at its highest since summer 2021 and redundancies are creeping up again, rising to their highest in a year. It should be stressed that by historic standards vacancies remain very high and both unemployment and redundancies are very low, but it’s also clear that we’ll be entering this downturn in far worse shape than we entered the last, both fiscally and economically.

“Nonetheless there are things that we can do quickly to help more people back into jobs and to work better with employers to fill their posts. There are still three million people out of work who want a job, but our work has shown that less than a quarter are engaged with Jobcentre Plus. So we need to do far more to broaden access to support for more of those who are out of work and want a job, and particularly those who have been out for more than a year. This means improving access to Jobcentre Plus and to programmes like the Restart Scheme, and bringing forward planned investment in the Shared Prosperity Fund. Employers need to do far more too, particularly to make work more flexible by default and to recruit in different ways.”

Ben Harrison, Director of the Work Foundation at Lancaster University, a leading think tank for improving working lives in the UK:

“Today’s figures show the stark challenges facing workers who are seeing inflation wipe away pay rises. Real wages are down 2.7% on the year with workers feeling poorer as the freezing temperatures bite and – despite Government energy support – many people are having to make tough decisions on whether they can turn the heating on.

“In this context, it is no surprise strikes are looming in the run-up to Christmas. After years of stagnating pay, the nearly 5.8 million public sector workers are being hit hardest as their wage increases of 2.7% fall short of private sector growth at 6.9%, and lag seriously behind inflation at 11.1%.

“Failure to agree fair deals for public sector workers could have serious implications for the wider economy. 417,000 working days were lost because of labour disputes in October 2022, which is the highest since November 2011. Economic inactivity continues to be high, and just under 2.5 million people report long term sickness is preventing them from working. Addressing these challenges demands investment in public services – from the NHS to specialist employment support – and that includes investment in the workers who deliver them.”

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

“Today’s data show almost one million working days lost to strikes in the three months to October, the highest in a decade. While not at ‘winter of discontent’ levels, strike days are likely to increase further with high inflation meaning a whole year of falling real wages, meaning they are no higher than before the financial crisis. In the public sector, pay growth picked up to 4.2% in October but is still well below private sector growth of 6.5%. If the Government wants to improve public services, it will surely need to increase pay with inflation running at almost 10% and high vacancies running in some services.

“There was a slight fall in the number of people outside the labour market, but economic inactivity remains higher than pre-pandemic. As a result, employment is still 300,000 below pre-pandemic levels with the UK having the slowest employment recovery from the pandemic in the G7. To change this, the Government needs to use some of the £2 billion underspend on its Plan for Jobs to widen access to find work to more over 50s and disabled people. This can help unlock a £23 billion economic boost by helping employers meet their needs.”

TUC General Secretary Frances O’Grady said:  

“2022 has been the worst year for real wage growth in nearly half a century.

“We are now on the brink of a damaging recession with the threat of one million lost jobs.

“Ministers must act now to put money in people’s pockets – starting with boosting the minimum wage and giving our public sector workers a pay rise to match the cost of living.

”And the Prime Minister should stop attacking working people trying to defend their pay, and sit down to negotiate fair pay rises with unions.”

Analysis published by the TUC yesterday (Monday) showed 2022 is set to be the worst year for real wage growth in nearly half a century. Working people have lost, on average, £76 a month in 2022 as a result of their pay not keeping pace with inflation.

James Reed, Chairman of, comments: 

“We are facing an unconventional recession from a job’s perspective. Over 217,000 jobs were posted to in November – only one percent down from October. The top line is that the UK’s employment rate and job postings remain high despite wider economic decline. In fact, more jobs were posted this November than in November 2019 – our last ‘normal’, pre-covid November.  

“Of course, we might be yet to see the worst of the recession. But perhaps the nature and severity of the recession from a job’s perspective is dependent on how stakeholders; employers, workers, and government, react to it.  

“We are at something of a ‘critical crossroads’ for the labour market and the wider economy. To navigate us out of the storm, employers should invest in business resilience by securing and developing talent, workers should look for opportunities for pay rises and the government should show leadership and invoke market confidence.”

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

“The largest strike action in a decade has led to 417,000 days of work being lost in October this year, off the back of persistently low real wage growth for public sector workers coupled with high inflation.

“Pressure for industrial action will remain high over coming months, with vacancies in the public sector near record levels. But slight rises in redundancies and short-term unemployment suggest that the tight labour market experienced since the onset of the pandemic may be beginning to unwind, which could be good news for public sector employers as competition for workers falls.” 

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