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‘Iceberg’ labour market continues to cool

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The latest labour market figures show unemployment on the rise and vacancies continuing to drop, but lower inflation has seen real-terms pay growth increase.

The number of payrolled employees in the UK fell by 18,000 (0.1%) between January and February 2024, but rose by 352,000 (1.2%) between February 2023 and February 2024.

The employment rate (for those aged 16 to 64 years) was estimated at 74.5% in December 2023 to February 2024, below estimates of a year ago and a decrease from the latest quarter. The unemployment rate is also up on the year and the quarter, at 4.2% in December 2023 to February 2024.

Meanwhile, economic inactivity for people aged 16-64 was up at 22.2%, above estimates of a year ago (December 2022 to February 2023), and up in the latest quarter.

Michael Stull, managing director of employment agency ManpowerGroup UK, told HR magazine that the figures were concerning.

He said: “The UK labour market increasingly resembles an iceberg. 

“The latest ONS data released today represents the visible tip, which is starting to show the issues UK businesses face in the economy and labour market, with a rise in unemployment and inactivity again this month. 

“If left unchecked, the various challenges present formidable obstacles to future economic growth and competitiveness.”


Read more: Vacancies fall while real pay growth strengthens


In January to March 2024, the estimated number of vacancies in the UK fell by 13,000 on the quarter to 916,000. Vacancies fell for the 21st consecutive period but were still above pre-pandemic levels.

Jon Boys, senior labour market economist for the CIPD, the professional body for HR and people development, said that the figures may lead to the Bank of England cutting interesting rates.

He told HR magazine: “With unemployment up and employment down, today’s statistics show a cooling labour market. Other evidence of cooling includes the continued fall in vacancies, and an uptick in the redundancy rate. 

“Taken together, this will ease pressure on recruitment and retention. It may also lead to the Bank of England cutting the base rate sooner.”

Annual growth in employees’ average regular earnings (excluding bonuses) was 6.0% in December 2023 to February 2024, or 1.9% adjusted for inflation.

Annual growth in total earnings (including bonuses) was 5.6%, or 1.6% adjusted for inflation.

ONS director of economic statistics Liz McKeown told HR magazine that slower inflation is pushing real-terms pay growth up.

She said: “Recent trends of falling vacancy numbers and slowing earnings growth have continued this month, albeit at a reduced pace. But with the rate of inflation also slowing, real earnings growth has increased and is now at its highest rate in nearly two and a half years.”

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