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ONS Labour Market: Job vacancies falling for an 18th consecutive period. Sector Reaction

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From October to December 2023, the estimated number of vacancies in the UK fell by 49,000 in the quarter to 934,000.

Vacancies fell on the quarter for the 18th consecutive period, the longest consecutive run of quarterly falls ever recorded but still above pre-coronavirus (COVID-19) pandemic levels. According to TUC analysis, the unemployment is 220,000 higher than a year ago.

  • The employment rate came in at 75.8%, versus 75.7% in the three months to November
  • Unemployment came in at 4.2%, unchanged versus the three months to November and in line with market expectations (Trading Economics)
  • Economic Inactivity fell slightly to 20.8%, versus 20.9% in the three months to November
  • Annual wage growth came in at 6.6% in the three months to the end of November, versus 7.3% in the three months to October and slightly below market expectations of 6.8% (Trading Economics)

Annual growth in regular earnings (excluding bonuses) in Great Britain was 6.6% in September to November 2023, and annual growth in employees’ average total earnings (including bonuses) was 6.5% in September to November 2023. 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 1.3% in September to November 2023, and for regular pay rose on the year by 1.4%.

In November 2023, there were 69,000 working days lost because of labour disputes across the UK, the lowest number of working days lost since May 2022. Over half of the labour disputes in November 2023 were in the transport, storage, information and communication industries.

The estimate of paid employees in the UK for December 2023 decreased by 24,000 on the revised November 2023 figure to 30.2 million.

Sector Reaction to ONS Labour Market Info Jan 2024:

Chancellor of the Exchequer Jeremy Hunt said:

“With inflation falling, it’s heartening to see real wages growing for the fifth month in a row. This is on top of the record cut to National Insurance worth nearly £1,000 in a typical household with two working peopleputting more money in their pockets.”

Secretary of State, Mel Stride MP said:

 “Today’s figures are yet more evidence the economy is turning a corner with the numbers of jobs hitting a record high and inactivity falling by nearly 270,000 last year.

 “Our £2.5 billion Back to Work plan will open up the benefits of employment for thousands more people, while we continue to make work pay by cutting taxes and boosting the national living wage.”

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

“Wage growth looks to be easing somewhat, though it remains above levels consistent with the Bank of England’s inflation target. Falling inflation means real wages are now rising but remain around £12,000 below pre-financial crisis trends. That’s the price of low growth over the last 15 years.

It looks like lower inflation will be achieved without significant falls in employment. Extending employment support to all of the 3 million people out of work who would like a job can help to boost economic growth.”

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

“2023 was a year of two halves for pay packets, with strong growth in the first six months of the year, and barely any growth at all after the summer. This means that annual pay growth will continue to fall in early 2024 – and is no longer fuelling inflation.

“With the labour market continuing to cool, the big question is at what level pay growth will stabilise – and what this means for the health of workers’ real wages.”

Neil Carberry, REC Chief Executive, said:

“The labour market has slowed over the past few months, but activity levels remain resilient. Vacancies are higher than pre-pandemic and unemployment, while rising, is still at a low level by historic standards. The jobs market does now seem to be in a bit of a standoff with the wider economy, with both employers and candidates waiting to see how the economy develops before committing to new roles.

“This situation means there is a premium on getting growth going by injecting confidence into businesses and workers. With pay clearly moderating – and other surveys pointing to this continuing in the Spring – and inflation falling, reducing interest rates would offer many hard-pressed businesses and workers a sign of progress.  

“As the debates at Davos this week show, adapting to the changes to the labour market driven by technology and demographics will be vital to delivering sustainable, inclusive growth. But that requires people’s issues to be prioritised in government and by business leaders. Using the upcoming Budget to set out a change of pace on skills, welfare-to-work and business support would be welcome – as would a more sensible debate around the UK economy’s need for managed immigration. A fresh look at the Apprenticeship Levy – which business has called out as failing for almost a decade now – is essential.”

Responding to today’s (Tuesday) ONS labour market figures, which show wages remain below their value in 2008, TUC General Secretary Paul Nowak said: 

“We all want an end to the cost-of-living crisis. But average pay is still worth £13 a week less than before the crisis began. And 220,000 more people are unemployed than a year ago, with job vacancies falling for the 18th month in a row.

“Conservative failures have cost families too much for too long. Working people desperately need a proper plan for jobs and growth that can get living standards rising sustainably again.”

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

“Today’s figures point to a mixed picture in the UK labour market with slowing pay growth and vacancies falling for the 18th consecutive quarter.

“Pay growth is on a downward trajectory from record highs late last year and is following the trend of falling inflation. While some workers may be seeing modest pay gains in their real pay, future gains may be reliant on inflation continuing to fall.

“While policy-makers at the Bank of England may be reassured by these figures as they assess whether to adjust interest rate levels, workers in insecure and low-paid work are at the sharp end of the most significant reduction in real living standards since ONS records began as they try to make ends meet.

“Addressing this challenge will be a key battleground in the next General Election. Although 934,000 vacancies remain in the economy, policies which only focus on increasing benefit sanctions to push those out of work to take on new roles risk making matters worse. Instead, all political parties need to make clear how they will improve access to higher quality and more secure employment while providing more tailored support for jobseekers with different needs.”

Dr Joe Marshall, Chief Executive of the National Centre for Universities and Business (NCUB), said:

“Even though the headline from new data published this morning reveals that vacancies are declining, they are declining slowly and remain historically high. What’s more, we are still grappling with persistent skills shortages. We are expecting skills shortages to get worse as demographic changes affect labour supply and as technology rapidly advances. The labour market is transforming at pace and the skills gaps will only become more and more acute. Our education providers are preparing people for jobs that may not yet exist, using techniques still unimaginable.”

“There are no quick fixes. The Government has a critical role in coordination and making sure that there is clear intelligence on labour market needs. Preparing for a completely transformed future labour market requires a suite of interventions with clearer coordination. NCUB has long called for improvements to intelligence and coordination. In 2024, we expect to see the first outputs of the new Department for Education Future Skills Unit, which we hope will provide much-needed insight into future labour market needs. For this to work effectively, at its very heart, we will require collaboration between employers and educational institutions. This collaboration will be critical to aid long-term recovery.”

Nicholas Hyett, Investment Manager at Wealth Club, commented;

“While there remains uncertainty about the quality of UK labour data, it looks like the Labour market continues a long slow easing which has seen 18 consecutive quarters of falling job vacancies – the longest run on record. We suspect the cost of living crisis is playing a part, pushing those who previously fell into the “economically inactive” bracket back into work. 

However, wage growth remains above inflation. That’s good news for workers, but together with rising employment may put the Bank of England off cutting interest rates any time soon. If the economy can function with interest rates at their current level, why cut? That would bode ill for investors – who have bet big on rates falling this year – and could see share and bond prices fall if rate cuts don’t come through as expected.”

Amy Knight, personal finance writer and small business commentator at NerdWallet UK, comments:

“Job vacancies between October and December decreased again with a drop of 49,000 compared to the previous quarter. This is the 18th consecutive fall in vacancies and could indicate a slowdown in the jobs market, although the number of vacancies still remains higher than pre-COVID.”

“The latest ONS data shows a drop of 24,000 in payrolled employees, which could suggest more workers are choosing to work on a freelance basis or start businesses of their own. However it’s important to note that the number of payrolled employees is well above pre-pandemic levels – good news for the government’s focus on productivity.”

“Unemployment rate was broadly unchanged since the previous release but it will be interesting to see whether warnings set out by the Chancellor in his Autumn Statement, that those who can work are expected to do so and risk having their benefits stopped if they refuse to engage in a work search, result in a drop in unemployment in next few data releases.”

“Looking ahead, lower-income families eagerly anticipate a boost to their wages in April, when the National Living Wage increases to £11.44 per hour for employees aged 21 and up. Whilst this increase is good news for workers and arguably overdue given recent inflation, wage hikes put pressure on small businesses who, if unable to absorb the extra staff costs, may be forced to raise their prices or look carefully at how the skills of different team members are deployed to increase efficiency.” 

“Whilst the ONS has described the current picture of the labour market as “broadly stable”, the drop in vacancies could be a sign that employers are choosing not to rush into creating new roles until they are confident they can balance the books. Despite any big ambitions, UK businesses may be cautious in pushing forward with their growth plans this year, and workers may need to be patient before the jobs market picks up again.” 

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