ONS Labour Market May 24: UK Claimant Count at 1.579 Million and Economic inactivity at 22.1%. Sector Reaction

The latest ONS Labour Market data has been released today (14th May 2024). The main points from ONS:

The UK employment rate (for people aged 16 to 64 years) was estimated at 74.5% in January to March 2024, below estimates of a year ago, and decreased in the latest quarter.

The UK unemployment rate (for people aged 16 years and over) was estimated at 4.3% in January to March 2024, above estimates of a year ago, and increased in the latest quarter.

The UK economic inactivity rate for people aged 16 to 64 years was estimated at 22.1% in January to March 2024, above estimates of a year ago, and increased in the latest quarter.

The UK Claimant Count for April 2024 increased by 8,900 on the month and by 29,300 on the year, to 1.579 million.

In February to April 2024, the estimated number of vacancies in the UK decreased by 26,000 on the quarter to 898,000. Vacancies decreased on the quarter for the 22nd consecutive period but are still above pre-coronavirus (COVID-19) pandemic levels.

Payrolled employees in the UK fell by 5,000 (0.0%) between February and March 2024, but rose by 288,000 (1.0%) between March 2023 and March 2024.

The early estimate of payrolled employees for April 2024 decreased by 85,000 (0.3%) on the month but increased by 129,000 (0.4%) on the year, to 30.2 million. The April 2024 estimate should be treated as a provisional estimate and is likely to be revised when more data are received next month.

Annual growth in employees’ average regular earnings (excluding bonuses) in Great Britain was 6.0% in January to March 2024, and annual growth in total earnings (including bonuses) was 5.7%.

Annual growth in real terms (adjusted for inflation using the Consumer Prices Index including owner occupiers’ housing costs (CPIH)) for regular pay was 2.0% in January to March 2024, and for total pay was 1.7%.

There were an estimated 22,000 working days lost because of labour disputes across the UK in March 2024.

The Chancellor Jeremy Hunt responds to the Office for National Statistics’ Labour Market Statistics for May 2024

Chancellor of the Exchequer Jeremy Hunt said:

“This is the 10th month in a row that wages have risen faster than inflation which will help with the cost of living pressures on families. And while we are dealing with some challenges in our labour supply, including pandemic impacts, as our reforms on childcare, pensions tax reform and welfare come online I am confident we will start to increase the number of people in work.”

Secretary of State for Work and Pensions, Mel Stride MP said:

“We are leaving no stone unturned to get people back to work, rolling out the most radical changes to welfare in a generation including reforming how we assess someone’s capability to work, overhauling the fit note process and helping over a million people through our £2.5bn Back to Work Plan.

“We’ll always be on the side of hardworking families and with real wages still rising, alongside tax cuts and the huge boost to the National Living Wage, we are incentivising work over welfare as we build a strong economy where everyone has a brighter future.”

The DWP team shared the following background information from their perspective with regards the big picture of this month’s Labour Market insights. DWP shared the following information:

• There are nearly 4m more people in work since 2010, with the unemployment rate down 40%.
• This slight rise in unemployment was forecast, and is expected to continue, in part due to the Bank of England’s decision to keep interest rates high as we bring inflation back to target. This trend is mirrored in other countries with high interest rates.
• We have a lower inactivity rate than many other economic heavyweights including the US, Italy, and France – and below the G7, EU and OECD averages.
• The ONS themselves have said caution should be taken when using these figures and advise people to look at alternative sources for employment trends.

Sector Reaction to the ONS Labour Market information:

Responding to the latest ONS figures, Stephen Evans, chief executive at Learning and Work Institute, said:

“The labour market continues to ease with employment and vacancies down. The number of people economically inactive due to long-term sickness is up 700,000 since the pandemic. But 1.7 million people who are economically inactive say they would like a job. The answer isn’t further tightening benefit eligibility or focusing on a so-called ‘sick note culture’; it’s widening and improving help to find work.”

The Recruitment and Employment Confederation (REC) Chief Executive Neil Carberry, said:

“The labour market tends to lag the economy, so today’s sluggish data reflects the recession we had over the winter. Business surveys, including our own Report on Jobs, suggest a turn in activity is coming across the summer following the recent return to growth.

“That said, the UK jobs market has remained remarkably robust in terms of low unemployment and high employment despite the recession. On the surface, this is good news. But as we return to growth it could be a problem. Unless we can better tackle inactivity, including long-term health issues, and find ways to be more productive with technology and skills, the UK will not grow as it could. Given that higher growth is the secret sauce for lower taxed and better funded-public services, every party should have the workforce at the heart of its thinking. And every company needs to be thinking about how they hire and deploy staff in partnership with professional recruiters. Bargain basement approaches will not work.

“Workers are still looking to increase pay in the face of recent inflation – but changing jobs is the most effective way to do that now as pay awards are significantly lower than last year.”

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

“While the UK might be out of a technical recession, today’s data suggest the UK’s labour market participation crisis deepens further. Employment is down compared to this time last year and 0.5% on the quarter, while unemployment and economic inactivity are both rising.

Unemployment rises and long-term sickness at near record

“Today’s figures estimate unemployment has ticked up to its highest level for seven months at 4.3%, while economic inactivity due to ill-health is up by a third compared to pre-pandemic levels and is now a near record 2,820,000.

“With vacancies still high, the Prime Minister has announced plans to overhaul the UK’s benefit system to get more people with long-term health conditions working. But the Government’s focus on extending welfare sanctions risks pushing these people even further away from the labour market.

“Since January to March 2023, on average, the number of people who are economically inactivity due to ill health has risen by 295 people a day. It is vital that the Government works closely with employers and other agencies to stem the flow of people who are leaving work due to sickness.

“And as one in three people (633,000) who are long-term sick report they want to work, the Government must prioritise de-risking the journey back to secure and sustainable work for those people with tailored employment support.

“Nominal wage growth remains historically strong at 6%. The impact of energy and food inflation on income has waned, and workers are seeing a 1.9% real pay rise on the year. However, the UK’s ten-month wage recovery may slow in the coming months as inflation levels off and with only 30% of British firms planning above inflation pay rises in 2024.

“While many employees may be better off compared to last year, most workers will be feeling poorer than in previous decades. According to the OBR, the UK is still in an 18 year period of wage stagnation with most workers poorer than they were in 2008 – and long-term pay growth lags behind other comparable nations such as the US, France and Germany.”

Nye Cominetti, Principal Economist at the Resolution Foundation, said:

Pay growth historically strong, but workers poorer than in 2008

“Britain’s jobs recovery continues to falter, with the workforce shrinking by the equivalent of one million workers since pre-pandemic times. This worrying employment fall shows the damage that an economic slowdown can cause.

“The news for those in work is more positive however, with real wages growing almost as much over the past 12 months as they did in the 16 years prior to this.

“The big question is whether the UK’s recent economic recovery will boost employment and raise output per worker, which will be needed to sustain its mini pay recovery.”

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

“Wage growth came in hotter than expected even as other indicators pointed to further clear weakening in the labour market. That casts doubt on a June interest rate cut and will support the case for policymakers waiting for more evidence. 

“Labour force survey data quality issues continue to make it difficult to get a clean read on how fast the labour market is cooling. But the latest figures show that inactivity remains a significant constraint on labour supply with over 800,000 more working age people outside the labour force than pre-pandemic, while long-term sickness remains near a record-high at 2.8 million. 

“Indeed data points to risks of near-term persistence of high wage growth. The Indeed Wage Tracker signalled a reacceleration of posted wage growth for new hires in April, picking up from 6.3% in March to 6.4% year-on-year. With the National Living Wage having risen by 9.8% on 1 April, posted wage growth remains strong in several lower-paid occupations led by retail (9.1%), childcare (9.0%) and cleaning (8.4%) and running above 7% in security, manufacturing, hospitality, maintenance and warehousing”.

Michael Stull, managing director of ManpowerGroup UK, said:

“Several entrenched and complex issues are characterising the state of the UK’s labour market right now. Unemployment and economic inactivity each present growing cause for concern, with unemployment at 4.3% and the economic inactivity rate for those of working age remaining at an elevated 22.1%. These are the headline reasons for our likening of today’s market to an iceberg, with what is happening at a deeper level requiring urgent attention. As we get closer to the iceberg, increased unemployment, skill shortages, wage pressure and heightened levels of inactivity are becoming increasingly apparent. Even with last week’s GDP numbers indicating the economy is slowly recovering, redundancies abound, job vacancies and applicant rates both remain high, and employers are still encountering chronic skills shortages and talent mismatches. 

“In the battle for talent, wage rises are stubbornly high and worrisome given the current lower levels of inflation and productivity levels, with wages in some cases being further inflated for certain roles and sectors because of competitive skills requirements. While productivity levels across the UK remain low, even with inflation coming down and a much-anticipated interest rate cut expected later this year, the road to further economic growth and competitiveness remains a rocky one.

Will unemployment and economic inactivity levels come down? Yes – but only if there’s a concerted effort to accelerate the UK economy by increasing collaboration between Government and business to make the right decisions; and being prepared to take risks by further investing for the future growth we’re aspiring towards. We also need to look beyond the numbers and evolve the financial cushions and pathways needed to get people into work, as well as reskilling and upskilling programmes to move more workers into specialised roles, for which there continues to be high demand.”

Responding to today’s (Tuesday) ONS labour market figures, which shows unemployment rising by 166,000 over the last quarter to 1,486,000 (4.3%), TUC General Secretary Paul Nowak said: 

“The Tories are presiding over a rapidly deteriorating jobs market.

“Unemployment and economic inactivity are shooting up. Over a million people are trapped on zero-hours contracts. And real wages are still worth less than in 2008.

“Forget ‘green shoots’ – everywhere you look the Conservatives are failing working people.

“Our country is crying out for a proper economic plan for jobs and growth to make sure household incomes can recover and everyone is secure at work.

TUC analysis published yesterday (Monday) showed the number of women economically inactive as a result of ill- health has increased by more than 500,000 over last five years.

Jonathan Firth, VP Recruitment Solutions at LHH said:

“Today’s labour market overview shows the resilience of the UK’s job market with a rise in payrolled employees versus this time last year, with annual growth in average earnings staying at the same level.

“Despite a dip in the overall UK employment rate, below estimates of a year ago, there is a lot of untapped talent available that, amid the rising cost of living, can be efficiently upskilled to meet demand.

“Our internal insight reflects this trend as, in the professional services especially, most of the vacancies in April were for office and business support roles. This indicates the need for evergreen administrative and operational support within these organisations. In 2023, 86% of workers worldwide said they were confident they could find a new job within six months.

“With these opportunities available, in order to attract top talent, organisations can further enhance their recruitment strategies by actively promoting their commitment to diversity, equity and inclusion, creating inclusive workplaces where individuals from diverse backgrounds feel valued and empowered.”

Labour Market Productivity and AI adoption

Deirdre Byrne, Head of UK, AI-powered productivity platform Slack commented: 

“Productivity is on the up and heading in the right direction. This is no surprise with the latest research by Workforce Lab revealing AI adoption in UK workplaces is increasing faster than anywhere else globally. Adoption surged from 19% to 28% of businesses between September to January – an indicator that the country’s pro-innovation stance on AI is paying off. In fact, four out of five UK employees using AI say it’s already improving their productivity.

“In part this is being driven by firms adopting a more thoughtful approach to meetings, and using technology to reduce unnecessary ones. But the businesses making the most productivity gains are those enabling employees to harness AI in their day to day work. Forward-looking firms are using AI to summarise written communication within a company, making it easier to stay across developments at the company and find, share and act upon key insights and data more effectively.”

Dr Rebecca Hinds, Head of The Work Innovation Lab, Asana’s think tank on the future of work commented: 

“While UK productivity levels continue to lag, employees’ workloads appear to be at their limit. According to our data, 40% of workers say they have high levels of burnout in their organisation. This burnout can lead to decreased motivation, lower engagement, and ultimately, lower productivity.

“This productivity paradox can be attributed to several factors. When employees feel as though they are overloaded with work but this doesn’t translate to meaningful outputs, it can be a sign that companies are lacking the right setup and processes to set workers up for success. A key factor may be an oversaturation of tools and technology. Since the pandemic, companies have invested heavily in technology to help increase productivity, particularly in hybrid and remote settings. However, in many cases, this has had the opposite effect. According to our recent research, workers spend nearly an hour every workday just switching between collaboration tools, with two-thirds (64%) of workers saying they feel some level of “digital exhaustion”—they are exhausted by the technologies they feel they need to use to do their work.

“To address these challenges, businesses are turning to AI. AI holds the promise of helping to solve the UK’s productivity puzzle, with 92% of employees expressing a desire to use AI to enhance some part of their jobs. However, it’s important that AI isn’t simply adopted without intention or added to an already oversaturated tech stack. Implementing AI with care involves proper training, change management, and ensuring that AI complements rather than replaces human expertise.

“UK business leaders can learn lessons from the hasty implementation of technology in previous years by taking a measured and more data-driven approach to AI adoption. This will help employees save time and resources, allowing them to focus on meaningful, strategic work, which should lead to sustainable increases in productivity that don’t come at the cost of worker burnout.”