March 2023 Labour market Statistics- Sector Response

New ONS Labour Market figures show real wages are down by 3.5% and public sector pay has fallen by 5.1%.

Main Points:

The UK employment rate was estimated at 75.7% in November 2022 to January 2023, 0.1 percentage points higher than the previous three-month period. The increase in employment over the latest three-month period was driven by part-time employees and self-employed workers.

The timeliest estimate of payrolled employees for February 2023 shows another monthly increase, up 98,000 on the revised January 2023 figures, to 30.0 million.

The unemployment rate for November 2022 to January 2023 was largely unchanged on the quarter at 3.7%. The number of people unemployed for over 12 months increased slightly in the latest three-month period.

The economic inactivity rate decreased by 0.2 percentage points on the quarter, to 21.3% in November 2022 to January 2023. The decrease in economic inactivity during the latest three-month period was driven by people aged 16 to 24 years. Looking at economic inactivity by reason, the quarterly decrease was driven by people inactive because they are students or retired.

In December 2022 to February 2023, the estimated number of vacancies fell by 51,000 on the quarter to 1,124,000. Vacancies fell on the quarter for the eighth consecutive period and reflects uncertainty across industries, as survey respondents continue to cite economic pressures as a factor in holding back on recruitment.

Growth in average total pay (including bonuses) was 5.7% and growth in regular pay (excluding bonuses) was 6.5% among employees in November 2022 to January 2023. Average regular pay growth for the private sector was 7.0% in November 2022 to January 2023, and 4.8% for the public sector. A larger growth outside of the coronavirus (COVID-19) pandemic period for the public sector was last seen in December 2005 to February 2006 (5.2%). In real terms (adjusted for inflation), growth in total and regular pay fell on the year in November 2022 to January 2023, by 3.2% for total pay and by 2.4% for regular pay. A larger fall on the year for real total pay was last seen in February to April 2009, when it fell by 4.5%, but it still remains among the largest falls in growth since comparable records began in 2001.

There were 220,000 working days lost because of labour disputes in January 2023, down from 822,000 in December 2022.

In December 2022, workforce jobs rose by 211,000 on the quarter to a new record high of 36.4 million, with 6 of the 20 industry sectors at record high levels.

Read the full March Labour Market statics report here.

Read February’s Labour Market statics here.

Additional information:

• Unemployment is higher in Canada, France, Italy, Spain, and the Euro area.
• Employment is lower in the US, France, Italy, Spain and the Euro area.
• The unemployment rate of 3.7% in the three months to January remains very low by historical standards’
• There are more than 30 million employees on payrolls in January 2023, over 1 million above pre-pandemic levels.
• As set out at the Autumn Statement, the Department for Work and Pensions will thoroughly review workforce participation to understand what action should be taken on increased economic inactivity, which will be set out at Budget.
• Monetary policy is the responsibility of the independent Bank of England. The government remains fully committed to the Bank’s independence, and the inflation target of 2%.
• In addition to the Energy Price Guarantee this winter, which is saving the average household £900 on energy bills, the government provided £1200 worth of support to the most vulnerable households for 2022-23: 

• £650 in cost of living payments;
• £400 through the Energy Bill Support Scheme;
• £150 Council Tax rebate;
• Additional support for pensioners and those claiming disability benefits.

• The government has announced further support on the cost of living in 2023-24, targeted at those most in need: 

• UK households on means-tested benefits will receive a further £900 Cost of Living Payment;
• Pensioner households across the UK will receive an additional £300 Cost of Living payment;
• People across the UK on non-means-tested disability benefits will receive a further £150 Disability Cost of Living payment, to help with the additional costs they face.

• We have extended the Household Support Fund for another year in England, with £1 billion of extra funding (including Barnett funding for the devolved administrations).
• The government continues to speak to unions to resolve industrial action and reduce disruption to vital public services. The objective has always been to find a fair deal, without risking our promise to halve inflation this year – because failing to meet that will make every household poorer.
• The government will always act to protect taxpayers and households, and remains committed to the Pay Review Body process.

Chancellor Jeremy Hunt said:

“The jobs market remains strong, but inflation remains too high. To help people’s wages go further, we need to stick to our plan to halve inflation this year.

“Tomorrow at the Budget, I will set out how we will go further to bear down on inflation, reduce debt and grow the economy, including by helping more people back into work.”

IES Analysis

There is good news and bad in today’s figures. The good news is that employment is continuing to creep up and economic inactivity is edging down. Unemployment is also broadly flat, and remains close to its lowest in 50 years. This now looks like a pretty well-established trend since last summer, and in further good news today some of the early indicators of a potential slowdown that we had flagged in recent briefings appear to be easing – with redundancies and short-term unemployment both levelling off, and vacancies falling less steeply than they were in the latter part of last year.

However, today’s figures also show how bad news often comes in threes. First, the number of people economically inactive due to long-term ill health has risen again after a couple of months of falls. This is now up by half a million in four years, to just over 2.5 million people – the highest level since comparable records began in 1992.

Secondly, the employment recovery for older people has been very weak, especially for those aged 50-64. Employment fell over the last quarter for this group (again after an apparent recent improvement). Recent falls are being driven by fewer older men in work, but the longer-term picture is of flat or falling employment rates for both men and women aged 50-64, after decades of employment growth pre-pandemic (especially for women).

Thirdly, the number of young people outside of education or employment is rising. This is being fuelled in particular by large falls in the number of young people full-time education, with today seeing the largest quarterly fall on record (down by 150 thousand). Employment for young people outside of education is up slightly, but not by nearly enough to offset this decline. It is not clear what is driving this, but separate ‘NEET’ data suggests that it may be a combination of fewer young people aged 18-20 entering education, while those aged 21-22 are finding it harder to get jobs when they leave.

Importantly, all three of these issues are being driven primarily by fewer people entering work rather than more people exiting it; and emphasise why at the Budget tomorrow we need a comprehensive plan to raise participation and to support better work. We have set out that this should include action in four areas: better access to employment support; investment in local partnerships; support to address the costs of working; and a far more coherent ask and offer for employers.

Sector Response

Minister for Employment, Guy Opperman MP said:

“We’ve promised to grow the economy in order to create more well-paid jobs, and we want everyone to have the same opportunity for a fulfilling work life. That’s why we’re focused on tackling inactivity, and it is encouraging to see even more people moving into jobs or taking steps to search for work.

“We are always looking at new ways to support people, including changes we’ve made to Universal Credit such as cutting the taper rate, increasing work allowances and bringing hundreds of thousands more claimants into closer contact with work coaches to boost their long-term prospects.

“As we look to spring, our Labour Market remains resilient with Jobcentres providing tailored help for every jobseeker, including older people or those with health conditions.”  

TUC General Secretary, Paul Nowak said:

“Britain’s real wage slump continues.

“Working people can’t take much more of this. Families are being forced to choose between heating their homes and putting food on the table.

“It is no surprise that workers are having to take strike action to defend their living standards.

“Ministers should be focused on resolving all of the current public sector pay disputes.

“That means using tomorrow’s budget to boost public service investment – including staff pay.

“This would help ease the staffing crisis and lay the foundations for a stronger economy in the years ahead.

“And the Chancellor must protect families across the board by cancelling the imminent hike in energy bills. The Energy Price Guarantee must not be raised beyond the current £2,500.”

Kate Shoesmith, Deputy Chief Executive of REC, said:

“Unemployment remains historically low, with vacancies well above pre-pandemic levels and economic inactivity still above the pre-covid rate – so there is plenty of work to be done by the Chancellor tomorrow. It is encouraging that pre-Budget signals from the Treasury will use some of the levers available to Jeremy Hunt to address these issues – nowhere is it more needed than in better, more affordable childcare support.

“Our analysis shows that labour and skills shortages could cost the UK economy up to £39 billion per year from 2024 – around the same as two Elizabeth lines. Government and business must reach out and help those furthest away from the labour market into work if we are to fill new job vacancies – which our own data shows hit a 14-month high in February.

“Firms can also step up on how they employ and engage. The government can help business by taking the big opportunity in the Budget tomorrow to provide clarity and stability on its growth plans. It is a big test for the Chancellor on skills, transport and tax. We need to see creative and revitalised policies on tackling economic inactivity, from rethinking low-skilled immigration policy to support for the over 50s.”

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

“There are still nearly half a million fewer people in work than before the Covid-19 pandemic, driven by more people out of work due to long-term health conditions and more older people out of work. Many of those who are out of work want to work, with 1.3 million people unemployed but a further 1.7 million who aren’t currently looking but say that they want a job now. So today’s figures show the scale of the challenge for the Budget tomorrow, with nearly three million people who want a job right now but most not getting any help to find one.

“The government has suggested that we’ll see new investment tomorrow in employment support for those out of work due to long-term ill health, but those who don’t take part could see their benefits reduce. This is being described as a ‘nudge’ but it’s more of a shove, and would be destined to fail. Threatening to cut people’s benefits will make people’s health worse and it will undermine trust and support from the services that it will need to work with to be effective, especially health services. It is also unnecessary, with a million of those off work with health conditions saying that they either want to work right now or expect to work in the future. Any offer of employment support needs to be open, unconditional, and working in partnership with health and other services.”

Stephen Evans, Chief Executive at Learning and Work Institute, said:

“There are one million fewer people in the UK workforce than if pre-pandemic trends had continued. While economic inactivity fell ahead of the Government’s ‘back to work’ Budget, this was driven largely by fewer young people studying. Only one in ten out-of-work 50-64-year-olds and disabled people get help to find work each year. That’s got to change if we’re to tackle the UK’s shrinking workforce.

“Real earnings fell at their sharpest rates since the global financial crisis, driven by high inflation. This 10-month fall in real wages is the backdrop to tomorrow’s Budget, the Chancellor must act further to help people through the pain. Slowing nominal wage growth in the private sector suggests that wage pressures may not be embedded in the economy, giving room for action.”

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 tough choices facing the Government at this week’s Budget to drive economic growth.

“Despite economic inactivity falling and employment growing, vacancies remain above pre-pandemic levels with employers struggling to fill 1.1 million posts. Although wage growth is strong, many workers are poorer than a year ago with real wages falling by 2.4% on the year and those in the public sector are hit hardest.

“The Government is right to focus on supporting those on Universal Credit with childcare costs to encourage people into work. Work Foundation research has shown working mothers with young children are 2.7 times more likely than fathers to experience severely insecure work – in large part due to the constraints they face when it comes to unaffordable or unavailable childcare provision.

“But there is no case to introduce yet further punitive sanctions into the welfare system which will be both costly and inefficient for workers and businesses alike, and is guaranteed to increase anxiety for some of the most vulnerable households in the country. Instead the Government should prioritise cancelling the Energy Price Guarantee to provide further support for low income households.”

Eugenia Migliori, CBI Head of Employment & Inclusion, said: 

“On the eve of the Spring Budget, the numbers of inactive people due to long-term sickness is at a record high. Tomorrow, the Chancellor has an opportunity to start fixing this by expanding the scope of health support that firms can provide to employees as a non-taxable benefit in kind.

“Too many other people, including parents and the over-50s, still face barriers in returning to work. The Chancellor can remove these by increasing funding and expanding childcare provision, investing in technology and new ways of working to boost productivity, and reforming the Apprenticeship Levy.” 

Charlie McCurdy, Economist at the Resolution Foundation said:

“The Chancellor and the Bank of England will both cautiously welcome today’s release, with early signs that labour market activity is improving and pay growth generating less inflation. But the Chancellor still has work to do to return employment back to its pre-crisis highs.”