Number off work due to long-term ill health tops 2.5 million for first time on record

Unemployment remains at a near all-time low at 3.6% and there are a record number of people on payrolls, today’s figures also show that economic inactivity is still higher now than pre-pandemic. However, there are concerning numbers having to stop work due to ill health.

Whilst these figures are encouraging, families are facing rising prices and employers need support to fill vacancies with a reliable workforce.

Read more here.

Main Points

The UK employment rate for June to August 2022 was 75.5%, 0.3 percentage points lower than the previous quarter (March to May 2022), which had a notably higher employment rate than other periods. The number of employees decreased on the quarter, while self-employed workers increased. The employment rate is 1.0 percentage points lower than before the pandemic.

The most timely estimate of payrolled employees for September 2022 shows another monthly increase, up 69,000 on the revised August 2022 figures, to a record 29.7 million.

The unemployment rate for June to August 2022 decreased by 0.3 percentage points on the quarter to 3.5%, the lowest rate since December to February 1974. The number of people unemployed for between 6 and 12 months increased on the quarter, while there were decreases for the short-term (up to 6 months) and long-term (over 12 months) unemployed. In June to August 2022, the number of unemployed people per vacancy fell to a record low of 0.9.

The economic inactivity rate increased by 0.6 percentage points to 21.7% in June to August 2022, compared with the previous quarter (March to May 2022), which had a notably lower economic inactivity rate than other periods. This increase in the latest quarter was largely driven by those aged 50 to 64 years and those aged 16 to 24 years. Looking at economic inactivity by reason, the quarterly increase was driven by people inactive because they are long-term sick or because they are students. Numbers of those economically inactive because they are long-term sick increased to a record high.

In July to September 2022, the estimated number of vacancies fell by 46,000 on the quarter to 1,246,000, this is the largest fall on the quarter since June to August 2020. Despite three consecutive quarterly falls, the number of vacancies remain at historically high levels.

Growth in average total pay (including bonuses) was 6.0% and growth in regular pay (excluding bonuses) was 5.4% among employees in June to August 2022. This is the strongest growth in regular pay seen outside of the coronavirus (COVID-19) pandemic period. Average regular pay growth was 6.2% for the private sector and 2.2% for the public sector. Outside of the height of the pandemic period, this is the largest growth seen for the private sector and the largest difference between the private sector and public sector.

In real terms (adjusted for inflation) over the year, total pay fell by 2.4% and regular pay fell by 2.9%. This is slightly smaller than the record fall in real regular pay we saw April to June 2022 (3.0%), but still remains among the largest falls in growth since comparable records began in 2001.

Gap in public-private sector pay growth hits widest level ever, as public sector job vacancies hit record high – Resolution Foundation

The UK’s tight labour market has seen the gap between public and private sector pay growth increase to its widest level ever outside of the pandemic period, and public sector vacancies reach a record high – posing delivery challenges to further government-led pay restraint – the Resolution Foundation said today (Tuesday) in response to the ONS labour market statistics.

Labour market quantities remained broadly flat on the month, with inactivity due to long-term sickness ticking up on the quarter, but unemployment and employment rates remaining broadly unchanged.

But with vacancy levels still at close to a record high, the labour market remains tight, which is feeding through into the stronger pay growth. Vacancies in the private sector have been falling for several months, but continue to hit new highs in the public sector – with 330,000 vacancies across the public administration, education, health and defence industries.

Average regular pay grew by 5.7 per cent in cash terms in the three months to September, rising to 6.6 per cent in the private sector. This was the strongest level of pay growth seen outside of the pandemic since records began, though not enough to prevent pay packets shrinking by 2.7 per cent in real terms.

But while pay pressure in the private sector continues to build, ongoing restraint in the public sector has restricted pay growth to 2.2 per cent in cash terms and -6.1 per cent in real terms – creating the widest pay gap on record.

The Foundation says that gap between public and private sector pay growth is unsustainable in the long-run as it will worsen the recruitment and retention challenges for already stretched public sector employers. This will make it harder for the Chancellor to credibly deliver a further period of public sector pay restraint in his upcoming Autumn Statement.

IES Analysis

On the face of it, the figures today are almost identical to those published last month: employment remains around one percentage point lower than it was before the pandemic; ‘economic inactivity’ is around one percentage point higher; this is despite more than 1.2 million unfilled vacancies; and while pay has grown strongly, earnings in real terms are falling as high inflation continues to bite.

However, if anything today’s data is even more concerning than recent months – with economic inactivity due to long-term ill health rising above 2.5 million for the first time on record; employment falling for disabled people and older workers; new data on labour market flows suggesting that more people are moving into economic inactivity and spending longer out of work; and pay data showing the gap between public and private sector jobs widening further.

These issues are holding back growth, adding to inflationary pressures and leading to lower living standards for those out of work. They are also not inevitable, as the UK is one of only five developed economies where employment remains lower now than it was before the pandemic.

In our view, taking action on this is long overdue and needs to be a focus of Thursday’s autumn statement. A top priority should be to reinvest the £2 billion in underspends from the Plan for Jobs to help more people back to work, in particular by broadening access to the Restart Scheme and by extending funding for community and local schemes that are closing their doors now as European Social Fund monies run out.

We also believe that there is an opportunity now for longer-term reforms that could support full employment and good work, and are keen to work with others on this through the new Commission on the Future of Employment Support.

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Sector Response

Chancellor of the Exchequer, Jeremy Hunt said:

“Unemployment remains near record lows – providing security to families and testament to the resilience of the British economy even in the face of severe global challenges.

“But I appreciate that people’s hard-earned money isn’t going as far as it should. Putin’s illegal war has driven up inflation – a hidden and insidious tax that is eating into paychecks and savings.

“Tackling inflation is my absolute priority and that guides the difficult decisions on tax and spending we will make on Thursday. Restoring stability and getting debt falling is our only option to reduce inflation and limit interest rate rises.”

Minister for Employment, Guy Opperman MP said:

“The UK labour market has remained resilient in the face of global challenges, with a low unemployment rate and a record number of people on payrolls.

“Whilst these figures are encouraging, we recognise that families are facing rising prices and employers need support to fill vacancies with a reliable workforce. Our focus is on making sure people looking for work, and those already in work, have the opportunity to boost their skills and keep more of what they earn – helped by our extensive network of Jobcentres.

“Our priority will always be to support the most vulnerable and we recognise that people are struggling with rising prices, which is why we are protecting millions of those most in need with at least £1,200 of direct payments.”

Pawel Adrjan, Director, EMEA Economic Research at the global job site Indeed, said:

“The labour market remains tight, with just one unemployed person per job vacancy, as a growing share of working-age people stay out of the workforce. For those in some of the lowest-paying sectors including, distribution, hospitality and retail, hiring conditions continue to be increasingly difficult – a tough pill to swallow as we head into the Christmas rush.

“The record 5.7% growth in pay outside the pandemic may at first suggest that employers are doing what they can to support staff, however with CPI inflation at 10.1%, the gains we’d previously seen are now a 3.8% fall year on year in real terms. While this fall is smaller than the record drop we saw recently, it’s a further sign that cost of living pressures continue.

“More recent data from the new Indeed Wage Tracker to the end of October Indicates that pay restraint is on the horizon. While wage growth in UK job postings was high at 6.2% year-on-year in October, it is down from its June peak of 6.4%. This suggests we are beginning to see signs of caution from employers as they worry about the economic forecast ahead.

“Despite the bleak economic forecast, the data shows that in July-September job-to-job moves increased, which indicates a willingness amongst employees to take risks – and can sometimes suggest a strengthening job market rather than what many are expecting. The data for October-December 2022 could show a very different story as we see further interest rate rises and the potential entry into a recession.”

Dr Helen Gray, Chief Economist at Learning and Work Institute, said:

“”Whilst there are some signs that the falls in real wages is starting to slow compared with the record reductions seen earlier in the year, they are still failing to keep pace with the cost of living. With inflation remaining high, this seems unlikely to change any time soon. Pay for public sector workers is continuing to fall behind that of the private sector, with the gap increasing at the fastest rate since the peak of the pandemic.

“Recent ONS analysis showed half a million more people are economically inactive due to long-term health problems compared with before the pandemic. In the context of a doubling in NHS wait times from referral to treatment and planned strike action by nurses, it is important that the Chancellor does not lose sight of the need to invest in vital public services to improve the economic outlook.

“Employment remains 334,000 below pre-pandemic levels. Whilst vacancies have fallen in recent months as employers respond to economic uncertainty, they remain at near record levels. The problem is the UK’s shrinking workforce, with over 629,000 people leaving the labour market since the start of the pandemic. Our research shows only one in ten out-of-work over 50s gets help to find work each year. The Chancellor needs to change this, reinvesting the £2 billion underspend from the 2020 Plan for Jobs to expand the labour supply and grow the economy.”

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

“Despite unemployment being at a near all-time low at 3.6%, today’s figures show that economic inactivity is still higher now than pre-pandemic, with concerning numbers having to stop work through ill health. 

“While vacancies are high at the moment, the Bank of England is forecasting unemployment will rise to 4.9% by end of 2024 and it is likely jobs will soon become harder to find. This could lead to a downward pressure on wages and conditions as the recession bites, and result in an increase in insecure work.

“At the autumn budget, the Chancellor should uprate social security in line with inflation to support job seekers and those on low incomes through the recession.

“The Government needs to support a wider group of people to access and stay in work by creating a cross-agency Participation Taskforce to address the complex underlying health and social issues need to help support more people back into work. This could include widening eligibility for Department for Work and Pensions employment support to those who are not on Universal Credit.”

Louise Murphy, Economist at the Resolution Foundation, said:

“The UK labour market remained resilient over the summer, with little sign yet of the rise in unemployment that the Bank – and probably the OBR too – are forecasting.

“Pay growth continues to strengthen in the private sector. This has driven a huge wedge between private and public sector pay, which has been subject to very tight settlements. This wedge is unsustainable in the long run as it creates huge difficulties for recruiting and retaining public sector.

“With public services already stretched and job vacancies already at record highs, it will be hard for the Chancellor to deliver a further period of sustained public sector pay restraint.”

IES Analysis

IES analysis finds that the lowest ever number of people became unemployed in the last three months – just 245 thousand – while more than 600 thousand became economically inactive

Not enough people accessing the right help to get back to work: “With more than a million unfilled vacancies, a shrinking economy and falling living standards, cutting access to employment support is a complete false economy. The Budget on Thursday needs to put this right.”

Commenting on today’s figures, Tony Wilson, Director at the Institute for Employment Studies said:

“There are now 630 thousand more people out of work than before the pandemic began and today’s figures show clearly that people aren’t becoming unemployed, they’re leaving the labour force altogether. The number of people leaving work to unemployment over the last three months was below a quarter of a million for the first time on record, while more than twice as many people left work to economic inactivity. And our analysis shows that once people become economically inactive they are less and less likely to come back to work, with the number off work for five years or more growing by more than two hundred thousand in the last few years.

“Our Commission on the Future of Employment Support launched last week showed that a large part of the problem is that people just aren’t getting the right help to get back into work. The number of jobseekers using Jobcentre Plus has halved over the last decade while the government’s Restart scheme is set to underspend by over a billion pounds. With more than a million unfilled vacancies, a shrinking economy and falling living standards, cutting access to employment support is a complete false economy. The Budget on Thursday needs to put this right, in particular by opening up Restart to more of those who are out of work and want help to get back in.”

TUC General Secretary Frances O’Grady said:   

“Working people deserve financial security. But instead, families are having to choose between paying their bills and putting food on the table. 

“Things will only get worse this winter with bills soaring, the country on the brink of a recession and the threat of one million lost jobs. 

“On Thursday the Chancellor must act to boost the economy and to protect workers. 

“He must do far more to strengthen pay – starting with boosting the minimum wage and giving our dedicated public sector workers a pay rise to match the cost of living.” 

Zero-hours contracts 

Commenting on the latest data on zero-hours contracts also published by the ONS today (Tuesday), which show more than one million people are employed on these terms, Frances added:   

“While the cost-of-living crisis escalates, more than a million workers are stuck on insecure contracts that make it impossible for them to budget or to plan childcare. 

“The case for stronger workplace protections and rights is more important than ever. Ministers must ban zero-hours contracts now.”