ONS Labour Market: 2.8 million people are not working due to long-term sickness

• UK employment level for those aged 16 years and over is up both on the year and on the quarter
• 2.8 million people are not working due to long-term sickness
• 1.1 million workers have zero-hours contracts
• Average real pay is still £12 per week lower than in 2008
• From November 2023 to January 2024, the estimated number of vacancies in the UK fell by 26,000 in the quarter to 932,000.
• Vacancies fell in the quarter for the 19th consecutive period but are still above pre-coronavirus (COVID-19) pandemic levels.
• There were 108,000 working days lost in December 2023 because of labour disputes across the UK. The health and social work industry showed the most working days lost this month.

According to the February ONS Labour Market data (13th February 2024) over the last year, employment growth has slowed and over the same period, the proportion of people economically inactive has increased, with historically high numbers of people reporting that they are long-term sick.

Payrolled employees in the UK rose by 31,000 (0.1%) between November and December 2023 and rose by 401,000 (1.3%) between December 2022 and December 2023. While the number of paid employees continues to increase, the rate of annual growth is decreasing.

The early estimate of paid employees for January 2024 increased by 48,000 (0.2%) during the month and increased by 413,000 (1.4%) in the year to 30.4 million. The January 2024 estimate should be treated as a provisional estimate and is likely to be revised when more data are received next month.

The UK unemployment rate is up

The UK employment level for those aged 16 years and over is up both in the year and in the quarter. The UK employment rate (75.0%) for those aged 16 to 64 years remains below estimates a year ago (October to December 2022), but increased in the latest quarter. The UK unemployment rate (3.8%) for those aged 16 years and over decreased in the latest quarter, returning to the rate a year ago (October to December 2022).

UK economic inactivity rate is unchanged

The UK economic inactivity rate (21.9%) for those aged 16 to 64 years was largely unchanged in the latest quarter but is above estimates a year ago (October to December 2022). The annual increase was driven by those inactive because they were long-term sick, which remains at historically high levels.

The UK claimant count for January 2024 increased by 14,100 on the month and by 61,200 on the year to 1.579 million.

From November 2023 to January 2024, the estimated number of vacancies in the UK fell by 26,000 in the quarter to 932,000. Vacancies fell in the quarter for the 19th consecutive period but are still above pre-coronavirus (COVID-19) pandemic levels.  The current sequence of quarterly falls in our vacancy estimates is the longest ever recorded but has slowed in the latest period, with the smallest fall in the number of vacancies from May to July 2022.

Nominal earnings growth remains strong, although it has eased a little in recent periods. Annual growth in total earnings (including bonuses) in Great Britain was 5.8% from October to December 2023, and annual growth in employees’ average regular earnings (excluding bonuses) was 6.2%.

Real pay growth continues as inflation continues to fall. Annual growth in real terms (adjusted for inflation using the Consumer Prices Index including owner occupiers’ housing costs (CPIH)) for total pay rose on the year by 1.4% from October to December 2023, and for regular pay rose on the year by 1.8%.

There were 108,000 working days lost in December 2023 because of labour disputes across the UK. The health and social work industry showed the most working days lost this month.

Sector Response

TUC General Secretary Paul Nowak said: 

“These figures show how people’s lives are being held back by the government’s failure to invest in our NHS. 2.8 million people are out of work because of long-term sickness and the numbers are still rising.

“Average pay is still worth £12 a week less than before the financial crisis 16 years ago and more than a million people are on zero-hours contracts. The Conservative legacy is low pay, ill health and more job insecurity.

“It’s time for change. We need a proper plan for jobs, growth and public services to get living standards rising sustainably again.”

Chancellor of the Exchequer Jeremy Hunt said:

“It’s good news that real wages are on the up for the sixth month in a row and unemployment remains low, but the job isn’t done. Our tax cuts are part of a plan to get people back to work so we can grow the economy – but we must stick with it.”

Hannah Slaughter, Senior Economist at the Resolution Foundation, said:

“The return of full labour market statistics show that the labour market continued to cool slightly at the end of last year.

“Nominal pay growth is slowing – easing the pressure on interest rates – but inflation is falling faster, causing a welcome if short-lived recovery in real wage packets.

“Of greater concern is the record 2.8 million people who are long-term sick. This is holding back the economy, putting pressure on the public finances and the NHS, and limiting opportunities for too many people. Reversing this trend will be a priority for the current and next government.”

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

“Labour market data, now based on new population estimates, is likely to be volatile due to low Labour Force Survey response rates. This makes interpretation difficult, but most measures suggest some easing in the labour market: the employment rate is down a little on the year, average earnings growth is easing, and vacancies are falling.

“The good news is that the labour market remains strong, with real earnings rising as inflation falls. But with employment still being below pre-pandemic levels and economic inactivity higher due to long-term sickness, the scope to grow the economy by increasing the labour force remains.”

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

“Today sees the first full publication of revised jobs data following revisions made to how Labour Force Survey responses are weighted. These show that things are a bit worse in the labour market than we had thought until a few weeks ago, with fewer people in work and more out of work than we had previously thought.

“Most worryingly though, they also show that things have a got bit worse than we thought since the start of the Covid-19 pandemic. Since then, the number out of work has risen by nearly seven hundred thousand, with at least two-thirds of this due to more people out of work due to long-term health conditions. This rise in worklessness has happened despite still over nine hundred thousand vacancies in the economy and rising salaries. It reiterates the need for us to do far more to help people out of work to get into work, more to help people struggling in work to stay, and more to help employers fill their jobs. Otherwise, weaknesses in our labour market will continue to hold back economic growth and widen social and economic inequalities.”

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

The UK labour market remained tight at the end of last year despite a faltering economy. The ONS’ reinstated Labour Force Survey estimates show lower unemployment and higher inactivity than previously thought, underlining the Bank of England’s concerns about labour supply constraints supporting high wage growth for some time yet. While the latest figures show a further easing of pay pressures as the labour market softens, it remains well above the Bank of England’s comfort zone. 

Indeed’s Wage Tracker shows that advertised pay for new hires rose by 6.4% year-on-year in January. Though down from 6.6% in December, UK wage growth remains well above that in the US and euro area. That underlines the challenge facing Threadneedle Street and why we may be waiting longer for UK interest rate cuts than from the Fed and ECB. 

Annual wage growth remains particularly strong in lower-paid categories such as childcare (9.9%), cleaning (8.4%) and retail (8.1%). With many of these sectors still grappling with worker shortages and a near double-digit percentage increase in the National Living Wage due in April, elevated pay pressures in this segment of the labour market don’t seem likely to abate soon. 

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

“Ahead of the last Spring Budget before the General Election, today’s figures show the labour market continues to face challenges as wage growth falls and levels of long-term sickness remain historically high.

“For millions, the cost of living crisis is not over, and yet the tide is continuing to turn on pay. After record pay increases in September 2023, workers are now seeing only modest real wage growth of 1.4%. This underpins why the OBR is forecasting living standards will be 3.5% lower in 2024-25 than before the pandemic.

“Data shows there are now 2.8 million people who are economically inactive due to long-term sickness, which is at one of the highest levels since records began in 1993. The recently revised ONS figures show that since before the pandemic, the UK now has just under 700,000 more working-age adults out of the labour market due to work due to ill health.

“Against this backdrop, the Government may be tempted to tighten welfare sanctions even further to help fill the 932,000 vacancies and reduce the benefits bill.

“Doing so will risk pushing those reliant on Universal Credit into low quality, insecure work – which could exacerbate any underlying health condition they have, and is unlikely to lead to sustained employment. Instead, the focus should be on scaling up investment in the availability of health and occupational support services, and driving up the quality of jobs on offer.”

Minister for Employment, Jo Churchill MP, said:

“With unemployment at just 3.8% and payroll employment at a record high, we are helping many more people access work and all the benefits it brings be it financial, health or social.

“Our pioneering welfare reforms are going further, helping reduce the number of people who would otherwise be on the highest tier of incapacity benefits by 370,000 and tearing down barriers to work for millions of disabled people through our Chance to Work Guarantee.

“Meanwhile our £2.5bn Back to Work Plan will drive down inactivity, grow the economy and change lives.”

Nicholas Hyett, Investment Manager at Wealth Club, commented;

“With unemployment a touch lower than expected and annual wage growth a touch higher, the UK labour market is proving stronger than economists had expected. However, the high temperature of the UK labour market could be down to ill-health rather than a sign of peak physical fitness. 

A growing proportion of the UK workforce, more than one in five, is economically inactive, with a historically high number signed off long-term sick. A shrinking workforce is increasing demand for those workers who are available and pushing up wages. Good news for those in work, but not so positive for the economy as a whole. 

Improving our national health is likely to become an increasing focus as we go through this election year. Not only for its own sake but as a cure for the higher inflation and weaker economic growth the UK has been experiencing recently. No mean task for an NHS already under pressure.”

Neil Carbery, REC Chief Executive, said:

“Today’s data benefits from the return of the Labour Force Survey and tells a clear tale. The Labour market softened in the spring and summer of 2023, before a slightly more positive last part of the year as unemployment dropped a little, employment grew a bit and vacancy numbers fell at a slower rate. Given the growth picture, this is a resilient showing and reflects the business survey data, including our Report on Jobs.

“There will be a lot of focus on the pay figures in this release, as pay growth did not fall back as much as expected. But with many wage settlements due to take place in the spring – and those from last year still in these figures – we will need to wait for more accurate data on 2024 trends. The significant rise in the National Minimum Wage will underpin wage growth to some extent this spring, and many companies report that this second significant rise in two years is proving challenging.

“The Chancellor can use the Budget to get growth going and boost employer confidence. A long-term plan to tackle skills and labour shortages, economic inactivity and weak productivity is long overdue. The resilience we have seen in the jobs market cannot be sustainable in the long-term unless we see a more significant return to economic growth.”

Lalitha Try, Economist at the Resolution Foundation, said:

“No news is good news along the bumpy road back to 2 per cent, with inflation flatlining at 4 per cent in January, confounding expectations of a rise.

“Instead, rising energy costs in January were offset by falling furniture and food costs – with food prices falling for the first time since September 2021. This is welcome news for low-income households who spend a higher proportion of their income on food.”