ONS Labour Market figures for May 2022 show more job vacancies than unemployed people in the UK: Sector Reaction

The latest ONS Labour Market figures are released today (17th May 2022). ONS Data shows that for the first time there are more job vacancies than unemployed people in the UK for the first time since records began.

Top figures show the 16-64 year old employment rate of 75.7% and economic inactivity rate of 21.4%. The number of job vacancies in February to April 2022 rose to a new record of 1,295,000. However, the rate of growth in vacancies continued to slow down. CMI are highlighting a ‘push me-pull you economy’.

According to ONS data Growth in employees’ average total pay (including bonuses) was 7.0% and growth in regular pay (excluding bonuses) was 4.2% in January to March 2022

What are the main ONS findings from the figures and stats?

The latest Labour Force Survey (LFS) estimates for January to March 2022 show that over the quarter there was a decrease in the unemployment rate, while the employment and inactivity rates increased.

The UK employment rate increased by 0.1 percentage points on the quarter to 75.7% but is still below pre-coronavirus (COVID-19) pandemic levels. The increase in the employment rate was driven by the movement of people aged 16 to 64 years from unemployment to employment. However, there was also a record-high movement of people from economic inactivity into employment. Total job-to-job moves also increased to a record high of 994,000, driven by resignations rather than dismissals, during the January to March 2022 period.

The most timely estimate of payrolled employees for April 2022 shows a monthly increase, up 121,000 on the revised March 2022, to a record 29.5 million.

Total actual weekly hours worked increased by 14.8 million hours to 1.04 billion hours in January to March 2022, compared with the previous quarter. However, this is still 10.7 million below pre-coronavirus pandemic levels.  Average actually weekly hours worked are similar to averages before the coronavirus pandemic, with the average hours worked by part-time workers at a record high (16.8 hours per week). Consequently, the shortfall in total hours is down to the reduced numbers in employment.

The unemployment rate for January to March 2022 decreased by 0.3 percentage points on the quarter to 3.7%. For the first time since records began, there are fewer unemployed people than job vacancies. 

The economic inactivity rate increased by 0.1 percentage points to 21.4% in January to March 2022. Recent increases in economic inactivity have been driven by those aged 50 to 64 years.

The number of job vacancies in February to April 2022 rose to a new record of 1,295,000. However, the rate of growth in vacancies continued to slow down.

Growth in employees’ average total pay (including bonuses) was 7.0% and growth in regular pay (excluding bonuses) was 4.2% in January to March 2022. In real terms (adjusted for inflation), growth in total pay was 1.4% and regular pay fell on the year at negative 1.2%; strong bonus payments have kept recent real total pay growth positive. Previous months’ strong growth rates were affected upwards by base and compositional effects. These initial temporary factors have worked their way out. However, we are now comparing the latest period with a period where certain sectors had increasing numbers of employees on furlough because of the winter 2020 to 2021 lockdown. Therefore, a small amount of base effect will be present for these sectors. This will not be to the degree we saw when comparing periods at the start of the coronavirus pandemic.

Sector Reaction to the latest ONS Figures:

Chancellor of the Exchequer, Rishi Sunak said:

“The unprecedented support we provided through our Plan for Jobs has led to the jobs market remaining robust despite global challenges, with the unemployment rate near record-lows and the number of payrolled employees at a record high.

“I understand that these are anxious times for people, but it’s reassuring that fewer people are out of work than was previously feared, and we are helping them to keep more of their hard-earned money through tax cuts, changes to Universal Credit and support with household bills worth £22 billion this financial year.”

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

“Real wages excluding bonuses saw their biggest monthly fall since 2013. This cost of living crisis is only going to intensify this year, making it vital that the Government does more to help people, particularly those on the lowest incomes. The obvious way to do this is to raise benefits, including Universal Credit, to match the rise in prices.

“Below the surface, the labour market is less buoyant than it appears. For the first time since records began, there are now fewer unemployed people than vacancies and employers are finding it tough to recruit. However, employment remains well below pre-pandemic levels driven by the continuing rise of older people leaving the workforce. Employers and the Government need to act swiftly to encourage people back into the labour market.”

Steve Haines, Director of Public Affairs at youth charity Impetus:    

“If you are a young person who needs support, no level of vacancies suddenly makes you work ready. The Government must build on the Kickstart scheme with a targeted, coordinated package of support that focusses on the longer-term needs of young people furthest from the labour market.”

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

“Despite employment continuing to rise, today’s figures underline the challenges facing workers who are seeing inflation eat away at their living standards. With regular pay at 4.2% (excluding bonuses) being outpaced by rising inflation at 7% – and the Bank of England warning of a recession and that inflation could rise to 10% – workers in low-paid and insecure employment are facing huge uncertainty and tough choices as the cost of living crisis bites.

“For weeks the Government has hinted at extra help to come, yet all workers will have heard this week is that they are not to ask for pay rises and that if they’re struggling they simply need to work more hours or get a better paid job.

“It is vital that we see targeted support delivered now via an Emergency Budget. As a priority, the Government must find a way to uprate benefits in line with inflation – or introduce measures to the same effect – to provide more security to those most in need.”

Anthony Painter, Director of Policy at CMI commented:

“We have a push me-pull you economy. On one hand soaring inflation, slowing growth and a cost of living squeeze. Yet alongside this, unemployment is at historical lows and vacancies are still rising though at a slower rate. Something has to give and the betting, unfortunately, has to be that the impact of inflation and falling real pay for millions will be a huge drag on economic growth. Any drag on business activity will likely soften hiring, whilst household incomes are set for the largest contraction since records began in 1964 – an economic storm is visible.

“The recent energy price cap hike is set to fuel the April cost of living rise announcement due tomorrow.  Although cost of living pressures may have encouraged some workers back into the workforce – the tightness of the labour market makes it a very difficult balancing act for both employers as there is still high demand for skilled workers. If employers aren’t able to go the extra mile to support workers’ pay and conditions they may find they lose valuable staff which also increases costs in the short-term. We saw a record number of job moves in the first quarter of the year. On top all of this, the Government has yet to go far enough to support struggling households and that in turn appears to be placing pressure on businesses given recent growth figures. The picture is complex but despite good news on jobs severe warning signals are visible.”

Pawel Adrjan, head of EMEA research at the global job site Indeed said:

“The labour market remained on solid footing despite the 0.1% contraction in GDP in March as hiring activity remained high, with 2.1 million people starting a new job in the first quarter of the year.

“However, clouds are gathering on the UK’s economic outlook and with the cost of living crisis deepening, this could be the last strong month before we see a slowdown in the labour market, which tends to be a lagging indicator.

“For the first time ever we’re seeing fewer unemployed people than job vacancies, with unemployment down to pre-pandemic levels of 3.8% – last seen in December 2019. Although growth has slowed, there’s still a record 1.3 million job vacancies to be filled in the UK adding further pressure on employers looking for workers. 

“While today’s update shows hiring challenges still remain, record job to job moves in Q1 showed continued jobseeker confidence, and it’s encouraging to see the record flow from inactivity, which had been ticking up due to sickness, to employment, possibly driven by cost of living pressures. 

“The tight labour market has pushed regular pay growth up to 4.2% – the highest growth rate since May 2008, outside of the pandemic period. Despite these record figures, in reality pay simply isn’t keeping up with inflation. Adjusted for CPIH inflation, regular pay has fallen 1.2% year on year, the biggest drop since November 2013.”

Minister for Employment, Mims Davies MP said:  

“Our domestic labour market is recovering well with payroll numbers growing once again and vacancies remaining strong. It’s also fantastic to see over one million more disabled people are in work than this time five years ago.

“We do however, fully recognise the impact global inflationary pressures are having on the cost of living for families which is why we’re taking action to help the lowest earners. Our Work Coaches are helping people daily in our Jobcentres to move into work – those going into full time employment could q be £6000 better off than on benefits.

“That’s why we’ve launched the Way to Work campaign to get half a million more people to progress into work with over 280,000 moving into a job during the first three months of the campaign.”

TUC – government is “missing in action” as cost-of-living squeeze tightens

The TUC has today (Tuesday) accused the government of going “missing in action” as Britain’s cost of living crisis deepens.

TUC analysis of this morning’s labour market figures reveals that:

• real wages across the economy are down by £68 a month compared to a year ago
• real wages in the public sector are down by £131 a month compared to a year ago

Commenting on the figures, TUC General Secretary Frances O’Grady said:

“Working families deserve financial security.

“But millions are at breaking point as real wages plummet and bills soar.

“The government is missing in action at the worst possible time.

“Ministers must stop dithering and come back to parliament with an Emergency Budget.

“We urgently need a windfall tax on oil and gas companies to help fund energy grants for struggling households.

“And we need a proper boost to Universal Credit and the minimum wage to get money back into people’s pockets, and to inject much-needed demand into our economy.”

Commenting on the latest data on zero-hours contracts, which show more than 1 million people are employed on these terms, Frances added:

“The government had a golden opportunity to ban zero-hours contracts and other forms of exploitation at last week’s Queen’s Speech.

“But ministers chose instead to side with rogue bosses by ditching their long-promised employment bill.

“Parts of our labour market remain a wild west.

“The case for stronger workplace protections and rights is more important than ever.”

IES Comment: Labour market tightens further, fuelling highest ever private sector pay growth

The stand-out figure in today’s labour market statistics is the record rise in private sector pay – up by 11.7% between March 2021 and March 2022, the highest annual increase since comparable records began in 2001.  This is being driven by double-digit pay growth across nearly all private sector services, and by a near-record rise in bonuses (which now account for 9% of private sector pay, up from 7% a year ago.

At the same time, vacancies continue to rise while unemployment has fallen further (to its lowest since 1974).  This means that for the first time in at least half a century, there are now more vacancies than there are unemployed people.  By comparison, during the pandemic there were more than four unemployed people chasing every job.

This tight labour market is being fuelled by continued low in participation in the labour force, with now 1.15 million fewer people either in work or looking for work than would have been expected on pre-pandemic trends.

Underneath this, there are still 500 thousand fewer people in work than before the pandemic began, while economic inactivity has risen by over 600 thousand among people aged 50 and over.

The Bank of England has made clear that the risks of higher pay in the private sector feeding through into higher prices is one key reason why interest rates are now rising in order to dampen demand.  This is also likely why government is so far continuing to resist calls to reverse its recent increase in employer national insurance.

However with inflation rising far faster than pay (leading to the largest real-terms pay cut in seven years), 400 thousand more people out of work than pre-pandemic and GDP falling in the month of March, we need urgent measures to boost labour supply rather than to dampen demand.  Instead, government is pressing ahead with plans to lay off work coaches in Jobcentre Plus and to cut investment in employment support programmes.

Commenting on the figures, IES Director Tony Wilson said:

“There’s some good news in today’s figures, with record pay growth in the private sector just about keeping wages ahead of inflation, and unemployment continuing to fall to its lowest since 1974. However this is masking now the tightest labour market that we have seen in at least half a century, with more vacancies than there are unemployed people for the first time ever, and well over a million fewer people in the labour force than on pre-pandemic trends. It’s this recruitment crisis that is fuelling higher private sector pay and bonuses and is also behind recent rises in interest rates.  However rather than trying to dampen demand, we need to be doing far more to boost labour supply, which would support economic growth, raise household incomes and help contain inflation.  In fact if anything, we’re cutting investment in employment support at just the time that we should be ramping it up.

“So alongside any new measures to support household incomes through the cost of living crisis, we need urgent action too to raise participation and help people into work.  This needs to be focused on better support for older people, disabled people and those with health conditions. Employers will need to do more too, and make sure that jobs are advertised and designed in ways that are accessible and inclusive for those further from work.”

IES analysis – May 2022

The attached briefing sets out analysis of the Labour Market Statistics published this morning. Today’s figures have some good news as well as continued reasons to be cautious. Unemployment has fallen to its lowest since 1974, there are green shoots on employment growth and economic inactivity in the data for the single month of March, and strong private sector pay is keeping total pay growth slightly ahead of inflation. All of this is welcome, and not entirely expected given the very weak data for the last two months.

However, today’s data also lays bare the extent of the recruitment and participation crises affecting the labour market. Overall there are still around 1.15 million fewer people in the labour force than on pre-pandemic trends; nearly half a million more people economically inactive, with recent rises being due to long-term ill health and caring responsibilities; and continued wide employment ‘gaps’ for disabled people, ethnic minority groups, and older people. The headline picture on pay also disguises relatively weaker growth in ‘regular’ pay excluding bonuses (suggesting many firms are cautious about the recovery) and significant falls in public sector pay.

New data on labour market ‘flows’ today also illustrates how recruitment challenges are being driven by exceptionally high labour market turnover – with a record number of people changing jobs in the last quarter (nearly a million); near-record levels of resignations; and large numbers flowing into and out of work. These flows to and from worklessness are being driven in particular by flows into and out of economic inactivity, although relatively low flows from inactivity to unemployment mean that overall flows out of inactivity are flat over the last year, despite continued strong vacancies.

All told, as with recent months, this combination of high worklessness, labour shortages and spiralling inflation risks being a pretty toxic mix. So far, public policy is responding to this mainly by trying to dampen demand through higher interest rates and higher employer National Insurance. However we would argue that we also need to see far great focus on measures to boost supply – which would support higher growth, improved household incomes and lower inflation. In particular, we remain concerned that government appears to be cutting employment support at exactly the time that we should be increasing it (by laying off Jobcentre Plus work coaches, cutting back on the Restart scheme and not reinvesting underspends from Kickstart); and that its Way to Work campaign is focusing on the short-term unemployed at a time when short-term unemployment has never been lower.

So we continue to believe that we need a new ‘Plan for Participation’ – from government and employers – to help more people back into the labour force; improve recruitment, job design and workplace support; and help those out of work to get into and on in work.