Labour Market Update – July 2024

23/8/24

Labour Market Overview

The latest ONS Labour Market Overview show that:

UK unemployment rate increased slightly to 4.4%, 1.528 million people unemployed
Unemployment amongst young people increased and remains high, particularly the youngest age group (aged 16-17 = 28.3% / aged 18-24 = 12%
Employment rate was largely unchanged at 74.4%, 32.99 million people employed
UK economic inactivity rate was slightly down on the last quarter at 22.1% and higher than 12 months ago. The quarterly decrease was largely due to those aged 16 to 24 and they were also largely responsible for the annual increase as well.

9.383 million people are economically inactive, an increase of 390,000 on last year and 883,000 higher than pre-pandemic levels.
Vacancies fell again to 889,000, the 24th period fall, down 30,000 from previous quarter, but higher than pre-covid levels. This means there were 1.7 unemployed people per vacancy in March 2024 to May 2024, an increase from the previous quarter due to falling vacancy numbers and rising unemployment.
Payrolled employees for June 2024 were 30.4 million, a rise of 0.8% compared to last year. This is a rise of 241,000 over the last 12 months. 1.42 million higher than pre-pandemic levels.
Annual growth in regular pay without bonus increased by 5.7%, and with bonus by 5.7%, this was the lowest growth since 2022. Adjusted for inflation, annual growth regular pay was 2.5% and total pay was 2.2%.
Claimant count increased by 32,300 on the month and 127,900 on the year to 1.663 million. This is the measure of those receiving benefit principally due to being unemployed.
Redundancies decreased to 3.4 per thousand employees, slightly lower than last year.

The Resolution Foundation published Job Done? which assesses the labour market since 2020 and the challenges facing the next government. Key findings are:

The 2010s saw rapid growth in employment, which reached a record high working-age employment rate of 76.2 per cent at the start of 2020, up from 70.3 per cent in 2010.
Post-pandemic, progress has been reversed, and employment stood at 74.3 per cent in early 2024.
The 2010s were marked by long-standing wage stagnation. Average wages are now only £16 a week, or 2.5 per cent, higher in real terms than they were at the time of the 2010 election.
Successive Conservative governments have boosted pay for the lowest earners with ambitious increases in the minimum wage.

People Management reports on analysis by employment law firm GQ Littler that more than one million fit notes relating to mental and behavioural disorders were issued by the NHS in the UK last year, with 42% of those signed off work for a month or longer. The reason behind the large number of fit notes could be the increased scope of PTSD diagnoses, increased awareness around mental health, decreased stigma and the continued fall out of the impact of Covid restrictions on mental health. In total, 10 million fit notes were distributed in the UK, 4.5 million of which signed workers off for more than a month.

ADP Research Institute (part of ADP HR and Payroll systems) published People at Work 2024: A Global Workforce View. Pay tops the list of worker priorities in all four regions and every age group. Compared to their counterparts across Europe, more workers in the UK think they’re paid fairly for their role (58%) and their skill set (57%), but both numbers fall far short of the global averages (66% and 65% respectively). And 15% of workers in the UK are unhappy with their enjoyment of the job, the largest share of any country in Europe and second only to Japan (19%).

Bright Horizons latest UK Work + Family Snapshot found these four key insights point the way for employers of choice:

Family inclusive employers gain better productivity, performance and wellbeing in their employees as well as a stronger employer brand.
Care provisions keep work sustainable during care disruption, return to office and life events.
Family support helps level the playing field and redress gender imbalances.

There is a notable variation in the way different generations need and use family benefits.

Employment Trends

The KPMG and REC, UK Report on Jobs: North of England states the seasonally adjusted Permanent Placements Index registered below the crucial 50.0 mark again in July, signalling 13 successive months of decline in permanent staff appointments. The latest decrease was linked by recruiters to a general slowdown in the jobs market with the North of England being the slowest of the monitored regions. However, the number of staff in temporary contracts rose across the North of England for the third month in a row. The report also advised that vacancy growth slowed across the North of England in July, but remained the fastest of the four monitored English regions, a trend true for both permanent and temporary roles.

The report also states that even though adjusted for seasonal factors, the Permanent Salaries Index posted above the 50.0 no change mark again in July to signal an uplift in starting salaries across the North of England. Recruiters asked, stated that higher salaries were offered in order to secure skilled workers. There was also a further increase in hourly pay rates across the North of England, marking eight months of consecutive monthly rises. Recruitment agencies that were questioned, advised that growth was sustained by the minimum wage. The rate of increase was solid, but the least pronounced since January.

Updates on Legislation and Policy

The new Work and Pensions Minister, Liz Kendall, has set out the Government’s Back to Work Plan with tackling economic inactivity at the top of the list. There are three pillars to the plan:

A new national jobs and career service to help get more people into work, and on in their work, combining the current Jobcentres and the National Career Service
New work, health and skills plans for the economically inactive, led by Mayors and local areas.
A youth guarantee for all young people aged 18 to 21.

She said “We’ll create more good jobs, make work pay, transform skills, and overhaul jobcentres, alongside action to tackle the root causes of worklessness including poor physical and mental health”

On the 17th July, King Charles delivered the first Labour King’s Speech in 14 years. The government announced it will bring 35 bills and draft bills before Parliament. There are ten key areas of focus, two of which will impact on the labour market, key extracts impacting employment are below

Make work pay – “Our Employment Rights Bill is a significant step towards delivering this Government’s plan to make work pay – the biggest upgrade to workers’ rights in a generation. We will ban exploitative zero-hours contracts, end fire and rehire, and introduce basic employment rights from day one. And through our changes to the Low Pay Commission, we’ll make sure the minimum wage is a genuine living wage”.
Break down barriers to opportunity – “We’ll take action to raise educational standards and break down barriers to opportunity. This includes measures to help people back into employment after the pandemic and a Bill to raise standards in education and promote children’s wellbeing. Our plan also includes reforming the apprenticeship levy”.

The government has redefined the remit of the Low Pay Commission (LPC) to factor in the cost of living when recommending minimum wage rates. This change is a cornerstone of the government’s Plan to Make Work Pay, which aims to address economic disparities and support working individuals. Business and Trade Secretary Jonathan Reynolds emphasised that this action is a vital step in tackling the cost of living crisis and boosting economic growth.

“Our focus remains on putting more money in working people’s pockets and boosting economic growth,” Reynolds stated. “The new remit to the LPC is the first of many vital steps we will take to support more people to stay in work and improve living standards.”

Another critical aspect of the overhaul is the narrowing of the wage gap between 18-20-year-olds and those earning the National Living Wage. The government has previously committed to eliminating ‘discriminatory’ age bands. This announcement says they are ‘taking the first steps towards making rates the same for everyone, regardless of age, by narrowing the gap between the National Minimum Wage, for 18–20-year-olds, and the National Living Wage.’

The Government has announced the launch of Skills England, a new initiative aimed at unifying the fragmented skills landscape and fostering a national ambition to enhance the country’s skill levels Skills are vital for economic growth, accounting for a third of productivity improvements over the last two decades. However, from 2017 to 2022, skills shortages in the UK doubled to over half a million, making up 36% of job vacancies. Skills England aims to address these shortages by bringing together central and local governments, businesses, training providers, and unions to meet the skills needs of the next decade across all regions. Skills England will provide strategic oversight of the post-16 skills system in alignment with the Government’s Industrial Strategy. This initiative is particularly focused on supporting local areas in developing skilled workforces in critical sectors such as construction and healthcare. By collaborating with the Migration Advisory Committee, Skills England will also work to reduce the country’s dependence on overseas workers.

Skills England will identify training eligible for the Growth and Skills Levy (which will replace the Apprenticeship Levy), providing businesses more flexibility to spend levy funds on essential training. This reform responds to long-standing employer demands for more control over training investments and is a suggestion that ALP has made to Government on numerous occasions over the years.

The initiative will be rolled out in phases over the next 9-12 months, beginning with the establishment of a shadow organisation within the DfE. Initial tasks include assessing future skills needs and building strong relationships with employers. A permanent board, Chair, and CEO will be appointed in due course.

Commentary

GEM are looking forward to working with our clients advising on all forthcoming changes initiated from the Employment Rights Bill and associated policy changes, impacting our industry sector. As a training provider we are also working with all relevant governing bodies to stay at the forefront of changes by Skills England. GEM hold direct funding and are able to support with a range of upskilling and staff development programmes to aid your workforce development.

I would welcome the opportunity to discuss the changing landscape with you and outline the support and programmes we offer that can enhance your People plans.

References

https://www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/unemployment

https://www.gov.uk/government/news/back-to-work-plan-will-help-drive-economic-growth-in-every-region

https://www.gov.uk/government/speeches/the-kings-speech-2024

https://www.gov.uk/government/news/ten-things-to-know-from-the-kings-speech

https://www.resolutionfoundation.org/app/uploads/2024/06/Job-done-final.pdf

https://images.adpinfo.com/Web/ADPEmployerServices/%7B88c62a9e-56a7-4679-8de0-56a98f270879%7D_PaW_Global_2024_EU_UK_090424_Singles.pdf?cid=elq_sales_enablement_45840&campaignid=45840&ecid=38637873&utm_source=eloqua&utm_medium=email&utm_campaign=ESI_FY25_EMEA_PaW&elqcst=272&elqcsid=8223

https://www.bbc.co.uk/news/articles/cz9dn8erg3zo

https://www.bbc.co.uk/news/live/c880xv811l1t

https://www.peoplemanagement.co.uk/

https://www.protimewfm.co.uk/en-gb/true-cost-overtime

https://www.gov.uk/government/publications/national-minimum-wage-and-national-living-wage-updated-low-pay-commission-remit-2024/national-minimum-wage-and-national-living-wage-low-pay-commission-remit-july-2024-hmtl-version

https://www.gov.uk/government/publications/right-to-work-checks-employers-guide/employers-guide-to-right-to-work-checks-21-june-2024-accessible-version

https://www.gov.uk/government/publications/right-to-work-checks-code-of-practice-on-avoiding-discrimination

https://www.gov.uk/government/news/skills-england-to-transform-opportunities-and-drive-growth

https://kpmg.com/xx/en/home/insights.html

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