Labour market LIVE from Learning and Work Institute (12 Oct)

  • Unemployment is 1,510,000, down by 40,000 from last month’s published figure (the quarterly headline fell by 126,000).
  • The unemployment rate is 4.5%, down by 0.1 percentage points on last month and down by 0.4 percentage points on last quarter.
  • The ONS figure for claimant unemployed is 2,112,800, and is down by 51,100 on last month. The claimant rate is 5.2%.
  • The number of workless young people (not in employment, full-time education or training) is 854,000, down by 38,000 on the quarter, representing 12.6% of the youth population (down by 0.5 percentage points).
  • Youth unemployment (including students) is 498,000, and has fallen by 40,000 on the quarter.
  • Vacancies in Jul-Sep 2021 rose (in the ONS official series) to 1,102,000 after recovering strongly from the low point of 340,000 in April to June 2020.
  • There are now 1.5 unemployed people per vacancy.
  • The employment rate is 75.3% (up by 0.1 percentage points on last month’s published figure and is up by 0.5 percentage points in the preferred quarterly measure

Learning and Work Institute comment

The labour market figures published on 12 October indicate a strongly improving labour market. However, employment levels remain well below those seen pre-pandemic and today’s numbers relate to periods before the Coronavirus Job Retention Scheme finished at the end of last month.

Duncan Melville, Chief Economist at Learning and Work Institute, commented:

‘The labour market continues to recover strongly. Today’s headline numbers from the Labour Force Survey (LFS) show an increase in employment of 235,000 in the three months to June to August 2021 – a very large quarterly increase by historic standards. The timelier HMRC employee payroll numbers show an increase of 207,000 in the month to September. This compares with an average monthly increase in the five years prior to the pandemic of just 31,000.

The prospects for employment growth remain positive. Vacancy levels have continued to grow strongly to around 1.1 million in July to September, after having exceeded a million for the first time in June to August. Data on job adverts from Adzuna indicate that vacancy levels continued to remain high into October. In part these very high vacancy levels reflect a range of labour shortages from HGV drivers to medical and social care staff to butchers (but not yet bakers or candle stick makers) which may in the not too distant future constrain employment and economic growth.

Given rapidly rising employment it is not a surprise that unemployment and inactivity amongst people of working age have both fallen substantially: down by 126,000 and 91,000 respectively in the three months to June to August 2021. This quarterly fall in unemployment was the largest in seven years.

Despite the ongoing recovery in the labour market, employment remains substantially lower than it was pre-pandemic. Compared to December 2019 to February 2020, employment in June to August 2021 was 657,000 lower. That we have labour shortages in this context is thus concerning. Pertinent here are the claimant count numbers. There are still around 2.1 million people on the claimant count, nearly 900,000 higher than pre-pandemic and around 600,000 above the official survey measure of unemployment, having been below this measure pre-pandemic. This suggests that substantial numbers of people are receiving unemployment-related benefits, but who are not either looking for work or available to start work. This raises concerns about the current efficacy of employment support designed to help individuals move into work.

The headline wage growth statistics released by ONS are distorted by two factors. Compositional changes in employment as people on lower wages were more likely to lose their jobs in the last year plus large numbers of people experienced a drop in wages while furloughed and have now returned to their previous jobs and pay levels. Allowing for these factors, the ONS estimate that underlying regular pay (excluding bonuses – a better measure of wage trends) rose by between 4.1 and 5.6 percent in the last year. This is an increase on last month’s estimate of 3.6 to 5.1 percent. This pick up presumably reflects the impact of labour shortages with employers having to raise wages to attract and retain workers. After a decade and more of very muted wages this could be good news for living standards but only if productivity also rises to warrant these increases. Ongoing investment in skills is key here. In the absence of productivity increases, these wage increases could add to costs pressures causing businesses to raise prices. There are already inflationary pressures in the system notably from increasing food and fuel prices and economic commentators are increasingly expecting some rise in interest rates from the Bank of England before the end of the year.

All the data released today relate to periods before the Coronavirus Job Retention Scheme (CJRS) finished at the end of September. The latest official HMRC numbers indicate that there were 1,325,000 people on furlough at end of August. If the fall over September was the same as the August fall, then there would have been around 1.1m people furloughed when it ended.

There has been much comment recently that the low level of HR1 notifications of an intention to undertake redundancies reported by the Insolvency Service mean that there will be only a (very) limited unemployment impact of the end of the CJRS. This may be overly optimistic. HR1 notifications only apply where an employer is planning to make at least 20 redundancies. Nearly two thirds (62 percent) of furloughed workers are with employers who employ less than 20 workers and who, by definition, do not need to submit a HR1 notification. Overall, three quarters of furloughed workers are with employers employing less than 50 workers. Those in the 21-50 size band would need to be planning to make a very large proportion of their workers redundant to need to submit a HR1 notification. Hence, the HR1 statistics are likely to be picking up very few planned redundancies amongst the small organisations where the bulk of furloughed workers are employed. Hence, the impact on unemployment of the end of the CJRS may well turn out to more substantial than some optimistic commentators are expecting. ’

Employment is up by 235,000 between March-May 2021 and June-August 2021. Since the pandemic started (December-February 2020), employment is down 657,000.

Unemployment fell by 126,000 between March-May 2021 and June-August 2021, and the unemployment rate decreased by 0.4 percentage points to 4.5% in the quarter. Since the pandemic started (December-February 2020), unemployment is up 146,000.

Economic inactivity has fallen by 91,000 between March-May 2021 and June-August 2021. and the inactivity rate decreased by 0.2 percentage points to 21.1% in the quarter. Since the pandemic started (December-February 2020), inactivity is up 346,000.

The national claimant count fell by 51,100 in the month to September 2021.

Youth unemployment fell by 40,000 in the quarter. There are 498,000 unemployed young people, and 301,000 (4.4% of the youth population) who are unemployed and not in full-time education.