The UK’s employment rate for April to June 2023 was estimated at 75.7%, a decline of 0.1% from the first quarter of the year, according to newly released ONS data. This quarterly decrease was primarily driven by full-time employees and self-employed workers.
The unemployment rate in the same period rose by 0.3% to 4.2%, with the increase mainly attributed to people who have been unemployed for up to six months. Meanwhile, the economic inactivity rate fell by 0.1% to 20.9%, with the decrease largely influenced by individuals inactive due to family or home care responsibilities.
Additionally, the number of those inactive because of long-term sickness reached a record high. There was also a large net movement from economic inactivity into unemployment between January and June 2023.
Payrolled employees for July 2023 saw a monthly increase of 97,000, bringing the total to 30.2 million. However, this July estimate is provisional and likely to be revised when additional data is received next month.
Vacancies in the UK fell by 66,000 on the quarter to 1,020,000 in May to July 2023, marking the 13th consecutive quarterly decline. Concurrently, the annual growth in regular pay (excluding bonuses) reached 7.8% in April to June, the highest rate since comparable records began in 2001.
Employees’ average total pay (including bonuses) grew by 8.2%, with the total growth rate affected by the NHS one-off bonus payments made in June 2023. In real terms, adjusted for inflation using the Consumer Prices Index including owner occupier’s housing costs (CPIH), annual growth for total and regular pay rose by 0.5% and 0.1% respectively.
Labour disputes resulted in 160,000 working days lost in June 2023, with over half of the days lost in the Health and Social Work sector.
Reaction
John Choong, equity and markets analyst at investing comparison platform, InvestingReviews.co.uk:
“June’s significantly stronger-than-expected wage growth numbers will delight Britons as pay finally catches up with inflation. However, the market won’t share the same sentiment. The widespread optimism of a lower terminal rate is now in jeopardy after four weeks of smooth sailing.
“Gilt yields had plummeted and mortgage lenders were battling for market position by cutting fixed rates en masse, but all that is now at risk of getting undermined. Nonetheless, bleak as it may be, the unemployment rate rising to 4.2% along with a drop-off in vacancies may be the very thing that stops the Bank of England from hiking rates by 0.5% at its next meeting.
“It’s also worth noting that these latest wage growth numbers are from June. If Wednesday’s CPI inflation print for July comes in cooler than expected, it would supersede today’s figures. As such, the market will hold its breath and hope that today will just be a bump on the road rather than time to buckle up for another rough ride.”
Sarah Loates, director of Derby-based Loates HR Consultancy:
“It’s really tough in the jobs market right now and the rise in the unemployment rate is a real cause for concern. We’ve seen a slight uptick in redundancy enquiries, only a trickle at the moment, and we hope it doesn’t turn into a tsunami.
“Based on this evidence, things in the wider economy may be deteriorating faster than expected. SMEs are increasingly planning for worst-case scenarios, but we’re hoping they don’t have to enact their plans.
“Aside from ongoing recruitment challenges, we are also seeing employers struggling to shoulder the April National Minimum Wage and Living Wage increases, especially those in hospitality and retail, due to the volume of lower-paid workers. This is also causing a knock-on effect for leader-level roles in these sectors, as the gap between entry-level positions and team leaders is squeezed.”
Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial:
“This is a mixed bag and a headache for the Bank of England. On the one hand, you have employment rates reducing by 0.1% and the unemployment count increasing by 0.3%. On the other, you have the number of payrolled employees spiking by 97,000 and total pay increasing by 8.2% year on year.
“This means the inflation data tomorrow will be pivotal and that is set to fall sharply. If it decreases by more than 1%, there’s hope the Bank of England may consider the wider effects of its policy and pause rates until the data evolves.”
Adam Myers, director at Southampton-based headhunting and HR consultancy, Stellamar:
“All of our clients are having problems hiring. It’s very much a buyer’s market right now. There’s also a socio-cultural disconnect. We are seeing organisations, which are mainly being run by Gen X and Boomers, fail to understand what they need to do to attract Gen Z and in some cases Millennials.
“Money, benefits and good work-life balance via flexible and remote working are all on the agenda of job seekers. Generally speaking, companies at present are proving cautious around hiring, but this is mainly due to the lack of talent rather than economic reasons. Manufacturing, retail and hospitality appear to be the sectors struggling to hire most.”
