According to the recent statistics released by the Office for National Statistics (ONS), the labour market in the UK is beginning to exhibit gradual signs of cooling. The information shows a decline in job vacancies alongside an uptick in unemployment rates. Employment patterns displayed mixed short-term movements across various metrics.
The Labour Force Survey (LFS) reported a reduction in employment predictions, whereas the Real Time Information (RTI) data from HM Revenue and Customs (HMRC) indicated a rise in the number of payrolled staff. In May 2024, there was an increase of 54,000 (0.2 per cent) in payrolled employees compared to April, and up by 265,000 (0.9 per cent) in comparison to May 2023. Preliminary estimates for June 2024 suggested an additional rise of 16,000 (0.1 per cent) from the prior month, resulting in a total increase of 241,000 (0.8 per cent) since June 2023, bringing the overall figure to 30.4 million.
The employment rate for individuals aged 16 to 64 years in the UK was estimated at 74.4 per cent for the period spanning March to May 2024, which is a decline from both the preceding year and the latest quarter. The unemployment rate for people aged 16 and over rose to 4.4 per cent during the same period, exceeding estimates from one year earlier and climbing in the most recent quarter. The rate of economic inactivity among those aged 16 to 64 years was recorded at 22.1 per cent from March to May 2024, reflecting an increase from the previous year, yet a decrease from the latest quarter.
Trends in employment growth and unemployment
The claimant count in the UK for June 2024 increased both monthly and yearly, reaching 1.663 million. The Department for Work and Pensions initiated an escalation in the administrative earnings threshold necessary for full work search obligations in May 2024, which is projected to impact approximately 180,000 claimants over the next six months, contributing to the uptick in the Claimant Count.
In the quarter from April to June 2024, the estimated number of job vacancies declined by 30,000, totaling 889,000, marking the 24th successive quarterly drop, although the number of vacancies still exceeds levels observed prior to the COVID-19 pandemic. Between March and May 2024, the annual growth rate for employees’ average regular earnings (excluding bonuses) in Great Britain was 5.7 per cent, which was the same rate for total earnings (including bonuses).
When adjusted for inflation using the Consumer Prices Index including owner occupiers’ housing costs (CPIH), real regular pay experienced a growth of 2.5 per cent, while total pay rose by 2.2 per cent during this timeframe. In May 2024, an estimated 49,000 working days were lost across the UK due to labor disputes. Despite the deceleration in pay growth, the Bank of England (BoE) is encountering difficulties as the jobs market is cooling at a slower pace than predicted, possibly affecting forthcoming deliberations regarding interest rate reductions.
The BoE is scheduled to convene on August 1 to review and issue new forecasts that may address the implications of this persistent wage growth on inflation.
