UK labour market shows mixed trends amid economic uncertainty

The UK’s employment rate saw a slight increase to 75.9% between January and March 2023, marking a rise of 0.2% from the previous quarter, according to the most recent data released by the Office for National Statistics. This uptick was largely driven by an influx of part-time employees and self-employed individuals.

However, a more timely estimate for April 2023 indicated a decrease of 136,000 in the number of payrolled employees, bringing the total down to 29.8 million.

This marks the first fall in total payrolled employees since February 2021, a factor that has been flagged as provisional and is likely to be revised with the receipt of further data next month.

Simultaneously, the unemployment rate for the first quarter of 2023 saw a marginal increase, ticking up by 0.1% to 3.9%. This rise was predominantly driven by individuals who have been out of work for over 12 months.

Conversely, the economic inactivity rate, which represents those not currently in work and not seeking or available to work, fell by 0.4% to 21.0%. This decrease was largely spurred by individuals aged between 16 to 24 years, with students and those inactive for other reasons contributing significantly to the decline.

Between October 2022 and March 2023, the UK witnessed a record high net flow out of economic inactivity, primarily driven by people moving from economic inactivity into employment.

However, the estimated number of job vacancies fell by 55,000 in the quarter spanning February to April 2023, to 1,083,000. This reflects the tenth consecutive quarterly fall, a trend which underlines ongoing economic pressures and industry-wide uncertainty.

In terms of wages, growth in average total pay (including bonuses) was 5.8%, and growth in regular pay (excluding bonuses) was 6.7% among employees for the period between January to March 2023. Despite this, when adjusted for inflation, growth in total and regular pay fell by 3.0% and 2.0% respectively.

Labour disputes resulted in the loss of 556,000 working days in March 2023, a significant rise from the 332,000 lost in February 2023.

Wes Wilkes, CEO at Net-Worth Ntwrk, said: “The labour market has held up well given the sheer number of headwinds in recent years but there are now signs that it is starting to give. The first fall in the number of payrolled employees for over two years, though caveated, is a red flag.”

Ian Hepworth, director of Funding Solutions UK, added: “Unemployment may have risen slightly but in economic terms it is still very low and would be considered full employment. This highlights the challenge the economy faces in terms of growth. It is not as simple as getting people into work. The level of economic inactivity has dropped, suggesting the cost of living crisis is forcing people to return to work.”

Mark Grant of The Business Finance Branch concluded: “Our clients’ overall experience of hiring at the moment is a lack of the right people for jobs in the right location, and a higher cost of hiring in terms of salary and often agency fees where they haven’t been able to attract people directly. This can add to the overall cost and risks associated with growth, just when they have had the confidence to push ahead with expansion plans.”