UK Labour Market Cools as Vacancies and Employment Decline
12 Sep 2023
12 Sep 2023 by Luke Puplett - Founder
The latest labour market figures for the UK show signs of weakening, according to the Office for National Statistics (ONS). The quarterly data for May to July 2023 indicates falling employment, rising unemployment, and declining job vacancies.
Employment Rate Drops
The UK employment rate fell by 0.5 percentage points in the three months to July 2023, down to 75.5%. This equates to a reduction of 207,000 in the number of people employed compared to the previous quarter.
The decrease in employment was mainly driven by a fall in the number of full-time self-employed workers. However, the number of employees remained largely unchanged over the period.
Unemployment Edges Up
As employment declined, the UK unemployment rate rose to 4.3% for May-July 2023. This 0.5 percentage point increase meant there were 159,000 more people unemployed compared to the prior quarter.
The quarterly rise in unemployment was predominantly caused by more people being unemployed for up to 12 months. Long-term unemployment saw a smaller increase over the three months.
Economic Inactivity Rises Marginally
Alongside falling employment and rising unemployment, the number of economically inactive people aged 16-64 also increased slightly. The economic inactivity rate edged up 0.1 percentage points to 21.1% in May-July 2023.
This small quarterly uptick of 63,000 economically inactive people was driven by 16-24 year olds. The data also showed the number inactive due to long-term sickness increased to a new record high.
Vacancies Continue Downward Trend
Job vacancies in the UK continued their downward trajectory, falling for the 14th consecutive three-month period. There were an estimated 989,000 vacancies in June-August 2023, down 64,000 compared with the previous rolling quarter.
The quarterly decline in vacancies was evident across most industry sectors and business size bands. This indicates a widespread reduction in hiring demand.
Earnings Growth Holds Firm
Despite the deterioration in other labour market measures, pay growth remains robust for now. Average weekly earnings increased by 8.5% including bonuses and 7.8% excluding bonuses in May-July 2023 versus the same period a year ago.
However, real terms pay growth remains much lower once adjusting for inflation. Total real earnings grew by just 1.2% annually over the period, hampered by elevated consumer price rises.
The ONS figures provide further evidence of a cooling labour market in Q2 2023. Recruiters may need to adjust expectations as vacancies decline and unemployment edges up. But for now, the tight match between job openings and jobseeker availability continues.
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