The latest figures from the Office for National Statistics (ONS) indicate signs of a cooling labour market, with falling vacancies and rising unemployment, yet earnings growth remains relatively strong.

Estimates from the Labour Force Survey (LFS) and HMRC’s Real Time Information (RTI) data reveal a decrease in employment figures in recent months. Conversely, the quarterly workforce jobs provisional estimate for March 2024 suggests an increase in employment since December 2023. These variations highlight the importance of long-term comparisons for more stable trends.

  • Payrolled Employees: The number of payrolled employees in the UK fell by 36,000 (0.1%) between March and April 2024 but rose by 201,000 (0.7%) from April 2023 to April 2024. The early estimate for May 2024 shows a slight decrease of 3,000 (0.0%) month-on-month but an increase of 167,000 (0.6%) year-on-year, reaching 30.3 million.
  • Employment Rate: The UK employment rate for individuals aged 16 to 64 was 74.3% from February to April 2024, a decline from the previous year and the latest quarter.
  • Workforce Jobs: The total workforce jobs in the UK rose by 431,000 year-on-year to 37.2 million in March 2024, with increases in both employee and self-employment jobs.
  • Unemployment Rate: The unemployment rate for people aged 16 and over was 4.4% in February to April 2024, up from the previous year and the latest quarter.

Labour Market Volatility and Data Considerations

Due to increased volatility in LFS estimates resulting from smaller sample sizes, quarterly changes should be treated with caution. The ONS advises using these estimates alongside other labour market indicators, such as Workforce Jobs, Claimant Count data, and PAYE RTI estimates.

  • Claimant Count: The UK Claimant Count for May 2024 increased to 1.629 million month-on-month and year-on-year.
  • Economic Inactivity Rate: The rate for people aged 16 to 64 was 22.3% from February to April 2024, higher than the previous year and the latest quarter.
  • Vacancies: The estimated number of vacancies in the UK decreased by 12,000 in the quarter to 904,000 from March to May 2024, marking the 23rd consecutive quarterly decline but still above pre-pandemic levels.

Expert Commentary

Jon Boys, senior labour market economist for the CIPD, the professional body for HR and people development, commented on the ONS figures:

“Taken in the round, the figures suggest that the labour market continues to cool but it’s a slow and gradual process. Unemployment and inactivity have edged up. However, unemployment remains at what is historically a very low level. Vacancies continue their long-term downward trend. This reflects that there is less churn in organisations than there was immediately after the pandemic and therefore a lesser need to hire to replace lost staff.

“Pay continues to defy the gravity of a cooling labour market, and regular earnings grew by 6%. With lower inflation this translates to a real-terms pay rise of 2.3%, helping to alleviate cost-of-living challenges.

“Big economic shocks like a pandemic require a quick response and innovative solutions but the slow and steady labour market we now find ourselves in gives employers and policymakers time to react. The big challenges of the next decade such as pursuing net zero and providing public services will require a focus on the workforce. The economy will need not only a larger workforce but also one equipped with the right skills. This will require a joined-up response that looks at immigration, education and skills policy, and health.”

Future Workforce Considerations

Annual growth in employees’ average regular earnings (excluding bonuses) was 6.0% from February to April 2024. Total earnings (including bonuses) grew by 5.9%. Adjusted for inflation using the Consumer Prices Index including owner occupiers’ housing costs (CPIH), real terms growth for regular pay was 2.3%, and for total pay was 2.2%.

There were an estimated 17,000 working days lost due to labour disputes across the UK in April 2024.

The ONS data provides a critical backdrop for ongoing discussions about the future of work, highlighting the need for strategic responses to evolving labour market conditions. As the UK navigates these changes, a focus on workforce development, skill enhancement, and integrated policy responses will be essential to address the challenges and opportunities ahead.