Record rise in long-term health conditions fuels tightest labor market in at least 50 years – FE News

The UK employment rate from May to July 2022 for people aged 16-64 fell by 0.2 percentage points in the quarter to 75.4% and is still below pandemic levels pre-coronavirus (COVID-19). The number of full-time employees and self-employed workers has increased over the past three months, while the number of part-time employees has decreased.

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The most recent estimate of employees on payroll for August 2022 shows a monthly increase, up 71,000 from revised July 2022 figures, to a record 29.7 million.

The unemployment rate from May to July 2022 fell 0.2 percentage points over the quarter to 3.6%, the lowest rate since May to July 1974. Over the past three months, the number of people unemployed for up to six months fell to a record high and the number of unemployed between 6 and 12 months increased. At the same time, the number of people unemployed for more than 12 months continued to decline.

The economic inactivity rate increased by 0.4 percentage points over the quarter to 21.7% from May to July 2022. This increase over the past three months has been largely driven by people aged 16 to 24 and 50 to 64 years old. With regard to economic inactivity by reason, the increase over the last three-month period was led by those inactive because they are students or are long-term ill.

The number of job vacancies from June to August 2022 was 1,266,000, a decrease of 34,000 from the previous quarter and the largest quarterly decline since June to August 2020.

Total employment in the UK workforce in June 2022 increased by 290,000 in the quarter to a record 35.8 million, and for the first time exceeded the pre-coronavirus level of December 2019.

Growth in average total employee compensation (including bonuses) was 5.5% and growth in regular compensation (excluding bonuses) was 5.2% from May to July 2022. In real terms (adjusted for inflation), over the year, total compensation fell by 2.6%. % and regular salary decreased by 2.8%. Average regular wage growth for the private sector was 6.0% from May to July 2022 and 2.0% for the public sector; outside of the peak of the coronavirus pandemic period, this is the biggest difference we’ve seen between the private sector and the public sector.

The Resolution Foundation analysis

Britain suffered its biggest real wage fall since 1977 this summer. But with stronger nominal wage growth and guaranteed energy prices meant to cut inflation by around four percentage points the extent of wage compression in Britain could bottom out this autumn compared to what it might otherwise have been, the Resolution Foundation said today (Tuesday) in response to the latest statistics of the ONS labor market.

The labor market remains tight, with unemployment falling to 3.6% and nominal regular wage growth strengthening to 5.2% in the three months to July. However, with CPIH inflation hitting 8.3% during this period, the real regular wage fell 2.8%, near its biggest drop since 1977.

However, the Foundation notes that if the outlook for inflation remains highly uncertain, the energy price guarantee could prevent a second peak in inflation this winter, removing about four percentage points from inflation compared to this she could have been.

If inflation were to stay around its current rate of just over 10%, real wages in Britain are unlikely to fall any faster than they are now, although they should continue down for another year – by then about 20 years of wage growth will have been wiped out.

There are other signs that wider economic turmoil is beginning to affect the labor market – with a falling employment rate, falling job vacancies and now layoffs bottoming out, signs that demand for labour- has started to decline as the economy plateaus.

Worryingly, the cost of living crisis has not yet encouraged people to re-enter the labor market. The inactivity rate fell again this month, driven by the long-term sick and students.

Industry response

Stephen Evans, chief executive of the Learning and Work Institute, said:

“Real wages continued to fall sharply, driven by high inflation. Capping energy prices at £2,500 a year for an average household will help. But additional support will likely be needed for the lowest-income households, which tend to spend most of their income on essentials like energy.

“The labor market is showing signs of flattening, with a declining employment rate and a rising rate of economic inactivity, in particular due to the increase in the number of people with long-term health conditions which leave the labor market. There are still 300,000 fewer people in work than before the pandemic, which again highlights the need to extend job search assistance to all those who want a job, which is currently limited mainly to unemployed and benefits. This should be a key part of any growth plan.

Tony Wilson, director of the Institute for Employment Studies, said:

“Today’s figures should ring alarm bells in government, with the number of people out of work due to long-term health issues now rising faster than at any time in at least three decades. This is happening despite there being over a million vacancies in the economy and unemployment being at an all time low in most of our lifetimes. Yet there are still more than half a million more people out of work than before the pandemic began and companies simply cannot find the workers to fill their positions. This is dampening growth but also driving up inflation, with wage growth in the private sector now above 6% and contributing to even higher prices. Of course, inflation is still higher, which, combined with anemic public sector wages, means that real incomes have fallen for the ninth consecutive month.

“This weak job recovery is due to an increased number of people out of work due to long-term health conditions, up by 350,000 since the pandemic and 130,000 in the last three months alone. NHS waiting lists, poor mental health, a lack of specialist employment support and long covid will all play a part in this, but whatever the reasons, we need to do much more to help people in poor health to prepare for, find and keep a job. .

For a government that wants to cut taxes to spur growth, today’s numbers also spell trouble. If we don’t do more to help more people get jobs, any tax cuts will just lead to even higher inflation and higher interest rates for longer.

Ben Harrison, director of the Work Foundation at Lancaster University, a leading think tank for improving work in the UK:

“Today’s figures remind us that government energy price guarantees alone will not be enough to end the cost of living crisis. Real wages are 2.8% lower over the year, and there is a significantly widening gap between wage growth in the regular private sector (6.0%) and that in the public sector (2.0%) .

“And although today’s data suggests that unemployment is now at a record high at 3.6%, workers in industries vulnerable to soaring energy prices will be worried as the employer support program six months fails to provide long-term security It is essential that when the Chancellor presents his budget in the coming weeks, he provides more clarity on how these sectors can be supported and how the government intends to restore growth to the UK economy.

TUC General Secretary Frances O’Grady said:

“Every worker deserves a decent standard of living.

“But as the cost of living crisis intensifies, millions of families are unsure how they will make ends meet this winter.

“The new prime minister must get a pay rise. Raising the minimum wage and giving public sector workers a decent pay raise would be a good start.

“And unions should be allowed to go to every workplace to negotiate appropriate wage increases for all workers.”

Gregory Thwaites, Research Director at the Resolution Foundation, said:

“Wage settlements tightened over the summer, but not enough to keep up with rapidly rising inflation. As a result, wage packages continued to shrink at a rate close to their fastest rate since 1977. The only bright spot is that a more benign outlook for inflation means they may not decline any faster, although they won’t rise for another year.

“The broader economic turbulence also appears to be affecting the job market. Instead of the cost of living crisis pushing people back to work, more and more people are leaving the labor market altogether, mainly for jobs. reasons of ill health.

Jack Kennedy, British economist on the World Jobs site In effectcommented :

“We are now starting to see signs of a losing labor market with employment falling and vacancies in the latest figures.

“At the same time, extreme tension remains, with vacancies nonetheless remaining near record highs and economic inactivity reversing its recent falls to its highest level since 2016. This has been caused by people on opposite ends of the spectrum. the career ladder; largely driven by 16 to 24 year olds and 50 to 64 year olds. This labor market participation gap means that hiring has become even more difficult for employers.

“While many people’s thoughts may be elsewhere at the moment, the cost of living crisis continues to be reflected in a squeeze on real pay conditions. Despite historically strong nominal regular wage growth, real wages fell -2.8% on the year – one of the steepest declines on record.

“The pressure on public sector workers is particularly acute, as their regular wages have risen only 2% year-on-year in nominal terms, compared to 6% for workers in the private sector, the most large gap never recorded outside the pandemic period.

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