ONS labour stats suggest difficult times ahead

The latest ONS statistics on the labour market show rising unemployment and redundancies with more carers and parents moving back into the workforce, but more people dropping out due to ill health.

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The latest labour market figures make for sobering reading. Employment fell during the three months from April to June while unemployment is up. The unemployment rate increased by 0.3 percentage points on the quarter to 4.2%. The Office for National Statistics says the increase in unemployment was driven by people who have been unemployed for up to six months which is in line with a rise in redundancies.

Meanwhile, the economic inactivity figures were down, largely due to those who had not been working because they were caring for family looking to find work. The ONS says there was a significant shift from economic inactivity into unemployment in the period. Nevertheless, the number of people who are economically inactive due to health reasons, exacerbated by the crisis in the NHS, increased to a record high.

Meanwhile, job vacancies continued to fall – for the 13th consecutive period – and total hours worked fell as employers, hit by economic pressures due to inflation, interest rate rises and other uncertainty, sought to cut costs. These pressures are likely to work their way down the supply chain in the next months with a potential impact on redundancies.

Pay rises were also high – at 7.8% on average – but this varied according to sector. Annual average regular pay growth for the private sector was 8.2% in April to June 2023 and 6.2% in the public sector, although the latter was significantly affected by the NHS bonus payment. The finance and business services sector saw the largest annual regular growth rate at 9.4%, followed by the manufacturing sector at 8.2%. Inflation was running at 7.9% in June. Experts say the pay rises are unlikely to be sustained and are in large part due to ongoing labour shortages in some sectors.

All of this suggests an uncertain future as we move into the autumn period. Tony Wilson, director of the Institute for Employment Studies, called the figures “pretty dire” after a couple of good months, with the June data dragging the averages down. He highlighted in particular the “worrying signs on redundancies”. Others are more upbeat, predicting longer-term recruitment freezes will thaw as inflation comes back under control and falls in economic inactivity driving employment growth due to ongoing labour shortages.

Many of those falls in economic inactivity will be parents forced back to work due to the cost of living crisis and benefits changes. The Government sees work as a way out of poverty, but others point out that many of those on benefits are working, needing benefits to top up low wages and to help with childcare costs. The work on offer also has to be sustainable, meaning it needs to be flexible enough to enable those with caring responsibilities to stay in it longer term at a time when childcare closures are increasing.

It’s a house of cards and each element has to be in place to ensure sustained economic growth.



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