Home>Health & Wellbeing>General Health & Wellbeing>Sicker workforce dampens labour stats

Sicker workforce dampens labour stats

27 March 2024

THE UK labour market is returning to normal, but its workforce is sicker – and youth inactivity is highest on record.

The UK labour market continued to normalise in early 2024 as vacancy levels almost returned to pre-pandemic levels, with unemployment ticking up among women but still low overall. The two less normal aspects of the labour market are headline nominal pay growth, which remains high despite a slower growth rate in the most recent data. And second, the health of the workforce – unlike other rich countries, UK employment is still below pre-pandemic levels, thanks to near record long-term sickness, the Resolution Foundation said in response to the latest ONS labour market statistics.

While private sector earnings growth is slower in the most recent data, headline nominal earnings growth (which measures pay growth on an annual basis) remains strong at 6.1 per cent in the three months to January – only down slightly on the previous month.

In real-terms, headline pay growth looks more normal. In the three months to January, real-terms (CPIH-adjusted) pay growth was 1.8 per cent – very similar to the 1.7 per cent average real pay growth in 2019.

There are signs of normalisation elsewhere in the labour market. Vacancy levels have fallen for their 21st consecutive month to leave them at 908,000. This gives a vacancy rate of 2.7 per cent, only slightly above the average 2019 vacancy rate of 2.5 per cent. Vacancy rates will reach their 2019 average in four more months on current trends.

But while pay growth and job vacancies are returning to normal, employment levels are not. The UK remains the only G7 economy not to have returned to pre-pandemic employment rates. At 75.0 per cent (unchanged on last month), employment remains 502,000 below its peak at the start of 2020 (the people equivalent of current vs peak employment rates).

This has been driven by rising economic inactivity, in large part specifically inactivity due to inactivity through ill-health, which was elevated post-pandemic and has risen by a further 85,000 over the past 12 months. The total number inactive due to sickness has come down slightly in the most recent data, but still stands at a near-record 2.7 million. There has also been an increase in youth inactivity in the most recent data, which at 33.9 per cent among 18-24 year olds is now the highest on record.

Louise Murphy, senior economist at the Resolution Foundation said, “After a four year rollercoaster, the Iabour market is starting to return to normal, with both unemployment and job vacancies back around pre-pandemic levels.

“But one lasting change is that our workforce is sicker. We have gone from chasing record levels of employment to tackling record levels of long-term sickness. Getting more people from inactivity into employment is Britain’s biggest labour market challenge of the 2020s.”