Labour Market Update – December 2023

15/1/24

Labour Market Overview

As a leading provider of human resource solutions across the region we wanted to share with you latest trends and insight for the month of December.

The latest ONS Labour Market Overview continues to be the adjusted experimental data and reported:

UK unemployment rate was largely unchanged at 4.2%, 1.42 million people unemployed
Unemployment amongst young people remains high (aged 16-17 = 18.9% / aged 18-24 = 11.8%)
Employment rate was largely unchanged at 75.7%
UK economic inactivity rate was largely unchanged on the quarter at 20.9%
8.70 million people are economically inactive, a decrease of 26,000 on the last quarter
Economically inactive is still 257,000 higher than pre-pandemic levels, and in July there was a record 606,000 classified as long-term sick but want to have a job
Vacancies fell again to 949,000, the 17th consecutive period fall, down 229,000 from a year ago, but higher than pre-covid levels
Payrolled employees remained similar to the previous quarter at around 30.2 million, 1.18 million higher than pre-pandemic levels
Annual growth in regular pay without bonus increased by 7.3%, and with bonus by 7.2%. Adjusted for inflation, annual growth regular pay was 1.4% and total pay was 1.3%
Redundancies were 3.6 per thousand employees in July, a slight decrease on previous quarter and just below pre-pandemic levels
131,000 working days were lost because of labour disputes in October, mainly in the health and social care sector

The Financial Times reported the ONS has released the early findings from their new survey which found that UK unemployment rate fell to 3.5% in the spring. This new figure, if confirmed, would match a low seen only once since the 1970s. The Transformed Labour Force Survey will replace the current survey in March 2024 and is currently under test and will be the data used to produce the ONS Labour Market Overview.

The Chancellor Jeremy Hunt and the Secretary of State for Work and Pensions Mel Stride have unveiled their Back to Work Plan – a package of employment focused support that will help people ‘stay healthy, get off benefits and move into work’ – as part of the Autumn Statement. The plan includes:

Reform of the Fit note process to improve the assessment of fitness for work and provide easier access to support for more people to resume work
Expanding key health and employment programmes to benefit over 500,000 people over the next five years and help those with mental health conditions stay in or find work
Rolling out mandatory work placement trials
Testing additional Jobcentre Support in England and Scotland
Extending and expanding the Restart scheme in England and Wales
Introducing a claimant review point after 12 months on the Restart scheme to decide further work search conditions or employment pathways to get the claimant into work. Claimants that refuse these new conditions without good reason will have their Universal Credit claim closed
Stricter sanctions for people who should be looking for work but are not engaging

The CBI’s latest Employment Trends Survey tracks labour market trends and people challenges facing businesses across the economy. The key takeaways are:

48% of business expect to grow their workforce in the next 12 months
38% are planning to increase pay in line with inflation
61% of firms are offering more flexibility at work to reduce transport and fuel costs

The CIPD has published its latest Labour Market Outlook Report – Autumn 2023. The key findings were:

Net employment balance remains positive – this measures the difference between employers increasing and decreasing staff
Redundancy intention has fallen for the first time in two years
Hard to fill vacancies prevalent in public sector
Expected pay in public sector now matches private sector
Generative AI seen as an opportunity to increase productivity
36% of employers see privacy and security concerns as the main drawback of implementing generative AI in their workplace

The Food and Drink Federation has published their Q3 State of Industry Report based on the latest members’ survey. This report tracks the sentiment of the UK’s food and drink manufacturers. It found that labour shortages have risen in the run up to festivities:

Industry’s vacancy rate (vacancies per 100 employees) rose to 6.5% from 4.8%
Labour shortages continue to hold back growth
Unfilled vacancies continue to affect a wide range of roles and skills including production operatives
Average pay has risen by 5.2% over the year to September 2023
Minimum wage rises of 9.8% in April 2024 will help those on minimum wage but are expected to have a negative impact on wage differentials

The latest KPMG and REC UK Report on Jobs Survey reported a weak economic outlook and greater caution among employers which has dampened recruitment in November. A sharp fall in permanent staff appointments combined with a fresh decline in temp billings indicates a broad-based reduction in hiring activity. At the same time, vacancies fell slightly for the second time in the past three months.

The latest KPMG and REC, UK Report on Jobs: North of England has reported that permanent staff appointments fall at stronger rate but temp billings increase at fastest rate since April. Neil Carberry, Chief Executive from the Rec has advised ‘The slowdown in our labour market seems to be easing a bit across the country apart from the North. But there is good news about with the fastest rise in temp billings in eight months in the region. Given that December is a time when employers generally postpone activity into the new year, we can hope with some confidence for more positive signs early this year that the labour market in the North can weather the current economic storm’.

The report also states the seasonally adjusted Temporary Billings Index for the North of England registered above the neutral 50.0 mark for the second month running, thereby signalling a further rise in billings received in December. Recruiters linked the increase to a greater preference for temporary staff among employers. The rate of growth was the quickest in eight months and solid. After a modest decline in November the seasonally adjusted Temporary Wages Index also posted above the neutral 50.0 mark to indicate a renewed rise in hourly pay rates across the North of England in December. This was largely due to competition for suitably-skilled workers, according to panellists. The pace at which temp wages increased was solid, but softer than the average seen over 2023 as a whole.

The Institute of Fiscal Studies latest report The Changing Geography of Jobs found a key feature of the labour market is the ‘hollowing out’ of the occupational structure with middle-paying occupations decreasing more than low or high paying occupations, which has a consequent impact on the geography of jobs. Some of the key findings are:

The decline in manufacturing jobs that provided those without university degrees a route to well-paid work, mainly affected the North and Midlands
The occupations that have seen the most growth since 1993 are either low-paid services such as social care, childcare and hospitality or high paid services such as IT, business and finance. The low-paid service jobs are across the UK, whereas the high-paid jobs are found mainly in London and other cities
There has been a trend to outsource low-paid work to specialised agencies e.g. cleaners, security, kitchen staff
Bright Horizons 2023 Modern Families Index Report found that there is still a high priority placed on family life. 71% of working parents and carers agreed that they feel confident discussing family-related issues with their employer, 76% have had to take a day off work unexpectedly to meet childcare requirements and 38% overall are likely to look for new employment in the next 12 months

Immigration Update

The latest ONS statistics show that net migration (difference between immigration and emigration) has hit record highs over the last two years. Net migration to the year ending June 2023 was 672,000. Immigration was 1.18 million, an increase of 102,000 and emigration was 508,000, an increase of 37,000. EU nationals accounted for 42% of the emigration numbers.

On 4th December 2023, the Home Secretary, James Cleverly announced plans to cut net migration by around 300,000. He presented a five-point plan:

Minimum salary requirement under the skilled worker visa route to rise to £38,700 from £26,200 and the minimum income for family visa will be raised from £18,600 to £38,700
End the 20% going rate salary discount for shortage occupations and replace the Shortage Occupation List with a new Immigration Salary List
Ban health care workers bringing family dependents to the UK
Increase the annual charge foreign workers pay to use the NHS from £624 to £1,035
Ask the Migration Advisory Committee to review the graduate visa route to ‘prevent abuse’

The Institute for Government has produced an Explainer about the government’s new Rwanda asylum plan. The plan to remove asylum seekers to Rwanda is in the form of a treaty signed by James Cleverly and the Rwanda Foreign minister. The treaty looks to address the issues raised by the Supreme Court.

The Safety of Rwanda (Asylum and Immigration) Bill tries to reverse the finding that Rwanda is not a safe place for asylum purposes, to rule out further legal challenges and close off all possible grounds for challenge nationally and internationally.

The GLAA have published their new three-year Strategy and accompanying Business Plan. Targets include the reduction of the time taken to make decisions and a significant increase in inspection activity.

References

https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/uklabourmarket/december2023#main-points

https://www.ft.com/content/d209c486-4a7f-4e56-8b07-679adac8ed00https://www.gov.uk/government/news/employment-support-launched-for-over-a-million-people

https://www.cbi.org.uk/articles/the-uk-s-labour-market-strength-or-strain/https://www.cipd.org/uk/knowledge/reports/labour-market-outlook/

https://www.fdf.org.uk/fdf/resources/publications/state-of-industry-reports/state-of-industry-report-q3-2023/

https://www.rec.uk.com/our-view/news/press-releases/report-jobs-hiring-slows-again-november-driving-quickest-rise-candidate-supply-almost-three-years

https://ifs.org.uk/publications/changing-geography-jobs

https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/internationalmigration/bulletins/longterminternationalmigrationprovisional/yearendingjune2023#:~:text=Provisional%20estimates%20that%20provide%20an,YE%20December%202022%20(745,000).

https://www.gov.uk/government/news/home-secretary-unveils-plan-to-cut-net-migration

https://www.instituteforgovernment.org.uk/explainer/government-rwanda-asylum-bill-treaty

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