Wage growth remains strong while economic inactivity and vacancies continue to fall. What does it mean to your business?
The latest ONS data cover the quarter from March to May 2023 and show a labour market that remains tight but continues to cool. The employment rate is still increasing, but so too is unemployment. Economic inactivity and vacancies are both falling.
We’ve been focusing a lot of our work over the past year on economic inactivity. But while it’s positive to see a slight decrease in that rate, down 0.4% on the quarter, economic inactivity due to long-term sickness again reaches a record high. It currently stands at 2.55 million, representing nearly 3 in 10 of those economically inactive. That suggests there’s still plenty of work we can all do to better support workplace health, as one route to tackling labour challenges.
Growth in regular pay was 7.3% in the three months to May, remaining very strong. The causes of record wage growth are contested, but what matters to the Bank of England when setting interest rates is that pay increases are being funded by higher prices, not productivity. Breaking this cycle requires action by government, not just higher interest rates.
It’s why we’ve been continuing our efforts to involve members in the review of the Shortage Occupations List in the immigration system, which will ease the most acute shortages – and why the government must urgently complete it. It’s why we’ve published an ambitious tax roadmap, as it’s key to unlocking business investment in people, innovation and capital. And it’s why we continue to urge businesses to focus on increasing flexible working to get more people into work.
Understanding the latest labour market statistics is one step to managing the current labour shortages.
Download the full Labour Market Update to find out:
- The impact of shortages on the labour market, and the sectors struggling the most
- Pay growth trends both in the private
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