In the latest report from the UK’s Office for National Statistics (ONS), the nation’s employment landscape is depicted as undergoing significant shifts in the face of ongoing economic challenges.
The key highlights from the report reveal a complex picture of employment, unemployment, and wage dynamics.
Between May and July 2023, the UK’s employment rate was estimated at 75.5 percent, representing a 0.5 percentage point decrease from the previous quarter (February to April 2023). The decline was primarily attributed to a decrease in full-time self-employed workers, as reported in the latest ONS Labour Market statistics.
Jack Kennedy, Senior Economist at the global hiring and matching platform, Indeed, commented on the situation: “The labour market continues to lose steam with a further fall in job vacancies, bringing them below the one million mark for the first time in over two years, while unemployment steadily rises to 4.3 percent. However, the job market remains historically tight with just 1.4 unemployed jobseekers for every vacancy. While there is a rebalancing, it’s a gradual change, meaning employers still often need to offer salaries at elevated rates to attract staff and fill open roles that compensate for the cost-of-living crisis.”
Payrolled Employees Remain Stable
The estimate of payrolled employees for August 2023 remained largely unchanged from the previous month, with a decrease of just 1,000 compared to the revised July 2023 figure, totalling 30.1 million.
However, it is important to note that the August 2023 estimate is provisional and may be subject to revisions as more data becomes available in the coming months.
Unemployment Rate Rises
The unemployment rate for May to July 2023 increased by 0.5 percentage points compared to the previous quarter, reaching 4.3 percent. This uptick in unemployment was mainly driven by individuals who had been unemployed for up to 12 months, according to ONS statistics.
Jack Kennedy from Indeed emphasised the challenge faced by policymakers: “The persistence of wage pressures underlines the scale of the challenge facing the Bank of England, with high-frequency economic data pointing to heightened recession risks as policymakers battle to get inflation back down to the 2 percent target.”
Economic Inactivity on the Rise
The economic inactivity rate also increased, rising by 0.1 percentage points to 21.1 percent during the same period. The surge in economic inactivity was primarily observed among individuals aged 16 to 24 years. Meanwhile, those who cited long-term sickness as the reason for inactivity reached a record high, while those inactive due to family or home responsibilities reached a record low.
James Reed, Chairman at Reed, noted: “Our data shows a 29 percent year on year (YoY) decrease in job postings for the first two weeks of September this year, compared to the same period last year. This decline reflects the impact of the current economic climate in which some businesses are having to cut costs and prioritise stability over growth.”
Vacancies Decrease Continuously
From June to August 2023, the estimated number of job vacancies in the UK fell by 64,000, marking the 14th consecutive quarterly decline, bringing the total number of vacancies to 989,000.
Jack Kennedy further highlighted the ongoing job market trends: “There’s no sign of wage growth tapering off any time soon. More recent data from the latest Indeed Wage Tracker shows advertised pay for new hires grew 7.3 percent year-on-year in August with the single-month figure ticking up from 7.1 percent to 7.4 percent.”
Strong Wage Growth
Despite the economic challenges, the report highlighted robust wage growth. Annual growth in regular pay (excluding bonuses) stood at 7.8 percent for May to July 2023, the highest rate since comparable records began in 2001. Annual growth in employees’ average total pay, including bonuses, was even higher at 8.5 percent. Adjusted for inflation, total pay saw a year-on-year increase of 1.2 percent, while regular pay increased by 0.6 percent.
Labour Disputes in Focus
The report also noted that in July 2023, 281,000 working days were lost due to labour disputes, with the majority of strikes occurring in the Education and Health and Social Work sectors.
Experts Weigh In on Wage Growth and Savings
Terry Payne, Aspire’s Global MD, emphasised that despite wage growth, many workers are still struggling to save money due to the ongoing cost of living crisis, leading many to actively seek higher-paying jobs.
Terry Payne stated: “Make no mistake, wages keeping pace with rising costs is a long overdue and welcome development – a sign that the economy is heading in the right direction. But the fact is, most people aren’t feeling the financial benefits of gradually increasing wages just yet.”
The latest ONS Labour Market Statistics illustrate the intricate interplay between employment, unemployment, wages, and economic challenges in the UK. As the nation grapples with these dynamics, workers and employers alike are adapting to a rapidly evolving labour landscape.
Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.
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