This morning’s ONS Labour Market Statistics show that record numbers of people started new jobs between July and September this year, as Covid restrictions fully eased and furlough started to unwind. However, the government have faced multiple warnings to not skirt over the wider issues at play in the labour market.
Chancellor Rishi Sunak said earlier today that the figures were a “testament to the extraordinary success of the furlough scheme”, adding: “We know how vital keeping people in good jobs is, both for them and for our economy – which is why it’s fantastic to see the unemployment rate falling for nine months in a row and record numbers of people moving into employment.”
In all 1.2 million people moved into work from being out of work (including nearly two fifths of all of those who were unemployed in the spring – another record), while 980 thousand people changed jobs.
Overall, this means that 2.2 million people started a new job between July and September – or 7% of all of those in work. In data going back to 2001, we have never seen a figure higher than 6.5%.
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However despite these record movements into work, the number of vacancies has continued to rise (now reaching 1.2 million) and the number of unemployed people per vacancy has fallen even further, to just 1.3 people.
This is the key measure used in assessing the balance between labour demand and labour supply, and is now at comfortably its lowest since at least 1971. At the height of the crisis from April to June 2020, there were 4.1 unemployed people per vacancy.
The says the Institute for Employment Studies (IES), says their analysis suggests that this recruitment crisis is being driven by huge falls in labour market participation, mainly explained by more older people leaving work and fewer younger people entering from education, and that lower migration explained between a quarter and a third of the falls.
Overall they estimate that there is a “participation gap” of 950 thousand, between the number of people in the labour market now and what would have been expected based on pre-crisis trends. Just over half a million of this is explained by older people, and particularly older women (300 thousand).
Commenting on the figures, IES Director Tony Wilson said: “We’ve never seen jobs being filled at a faster rate than now, with three quarters of a million people starting a new job every month since Covid restrictions were eased.
“Yet despite this we’re seeing labour shortages across all parts of the economy and a tighter jobs market than at any time in at least fifty years. All told, we’ve nearly a million workers now missing from the labour market, and their absence is now holding back our recovery and adding to inflation. There’s little sign in today’s data that these problems are being driven by furlough or even Brexit.
“Instead they’re mainly being caused by older people who lost their jobs not going back to work as well as by more young people staying in education. These problems aren’t going to fix themselves in the near future, and we’re still doing nowhere near enough to help get people back into work, particularly for older workers, disabled people and parents.”
Liberal Democrat Treasury Spokesperson Christine Jardine MP said in light of the news: “The Government mustn’t get complacent off the back of today’s figures. Thousands of people out of a job face a cost of living crisis this winter and are worried about higher energy bills, higher taxes and cuts to Universal Credit.
“Meanwhile countless businesses are crying out for help with record staff shortages – whether it’s HGV drivers or chefs – yet the Government has no plan whatsoever.
“Ministers can’t ignore these problems below the surface. We need to see real support with the cost-of-living crisis, starting with reversing the unfair cut to Universal Credit. And a proper plan to recruit all the extra workers on which our businesses depend.”
Responding to the latest ONS labour market data, Nick Bowes, Chief Executive of Centre for London think tank emphasised the capital’s specific issues, highlighting: “With the highest unemployment rate and the only region with fewer payrolled employees now than at the start of the pandemic, London’s recovery continues to lag behind the rest of the country.
“With so much of the levelling up agenda focused on areas outside of London, today’s data is a stark reminder that the city’s economy can’t be relied on to just bounce back under its own steam and that London has large levelling up challenges of its own.
“Government must not turn its back on the city. We need a much more joined-up approach that recognises the need to invest in skills, education, early years, housing and health.”
They emphasised that 5.6 per cent of London’s population were out of work in the three months ending in September. This is a decrease of 0.2 points on the previous quarter.
The number of payrolled employees in London increased by 0.9 per cent compared to the previous quarter. This figure currently stands at 98 per cent of the number of payrolled employees in Q1 2020.
London has experienced the slowest increase in payrolled employees in accommodation and food services, and has continued to experience negative growth in transportation and storage.
Professor Len Shackleton, economist and labour market expert at the Institute of Economic Affairs, also issued a mixed respose to the news, writing: “The good news from the labour market keeps on coming, with unemployment and redundancies down again in July-September, while October data on payroll employment and vacancies suggest that the end of furlough has not yet led to a significant change in this broadly favourable picture.
“One particular sign both of the vibrancy of the jobs market and rising confidence among workers is the record number of job-to-job movements. Such switches tend to be associated with faster productivity growth over time.
“However, all is not necessarily positive. Employment has been growing faster in the public sector than the private sector, and the total hours worked and the numbers in self-employment remain below the pre-pandemic level. There may still be a post-furlough spike in unemployment as periods of notice come to an end.
“Some see inflationary danger in the latest figures for annual earnings growth, 5.8 per cent in July-September. However, as the ONS cautions, this may in part be a reflection of the base in the corresponding period last year (when wages had fallen) and of the compositional effect as more low-paid than high-paid jobs were lost. Temporary increases in pay may be a symptom of a labour market that is readjusting to a changed economy rather than part of a sustained upward rise in wages and prices.
“Given continuing uncertainty and flux, it is probably best that interest rates are not rising just yet. It would also be a good idea if the Prime Minister and other spokespeople stop fuelling speculation about a further possible lockdown. If there is an expectation that Christmas may be impacted, much of the current labour market optimism could quickly evaporate.”