The latest labour market report from the Office for National Statistics (ONS) for October 2024 provides a mixed picture of employment in the UK.
While payrolled employee numbers show modest growth over the past year, there is a notable slowdown in pay growth as employers face economic pressures.
Between July and August 2024, the number of payrolled employees fell by 35,000, marking a slight 0.1% decline. However, on a yearly basis, from August 2023 to August 2024, payrolled employees rose by 165,000, representing a 0.5% increase. When comparing June to August 2024, figures from the Labour Force Survey (LFS) indicate a small rise of 3,000 payrolled employees over the quarter and 203,000 over the year.
In September 2024, a provisional estimate showed a decrease of 15,000 payrolled employees compared to the previous month. However, this number still reflects an annual increase of 113,000, bringing the total number of payrolled employees to 30.3 million.
Caution Urged Over Labour Force Survey Estimates
The ONS advises caution when interpreting LFS estimates due to increased volatility caused by smaller sample sizes. To gain a comprehensive understanding of the labour market, these estimates should be considered alongside other indicators, such as Workforce Jobs (WFJ), Claimant Count data, and Pay As You Earn (PAYE) Real Time Information (RTI).
The UK employment rate for those aged 16 to 64 years was estimated at 75.0% for June to August 2024, showing a positive increase compared to the same period last year. The unemployment rate for those aged 16 and over fell to 4.0%, a decrease both from the previous quarter and from last year’s figures.
Economic inactivity, which refers to people aged 16 to 64 who are not in work or seeking employment, also saw a slight decrease. The rate was estimated at 21.8% for the same period, down from a year ago and the previous quarter.
Rising Claimant Count and Decrease in Vacancies
The UK’s Claimant Count, which includes people claiming unemployment-related benefits, rose to 1.797 million in September 2024. This increase reflects both month-on-month and year-on-year growth. The Department for Work and Pensions has recently introduced changes to the administrative earnings threshold for full work search conditionality, which is expected to affect approximately 180,000 claimants over a six-month period, further increasing the Claimant Count.
In addition, the number of job vacancies in the UK continues to fall. From July to September 2024, vacancies decreased by 34,000 compared to the previous quarter, marking the 27th consecutive period of decline. Despite this downward trend, the number of vacancies remains higher than pre-pandemic levels, indicating that labour demand is still robust.
Slowing Pay Growth Amid Economic Pressures
Pay growth has shown signs of slowing, with annual growth in regular earnings (excluding bonuses) recorded at 4.9% between June and August 2024. Meanwhile, total pay, which includes bonuses, saw an annual growth rate of 3.8%, influenced by one-off NHS and civil service payments made in 2023. Adjusting for inflation using the Consumer Prices Index including owner occupiers’ housing costs (CPIH), real-term growth in regular pay stood at 1.9%, while total pay increased by 0.9%.
In August 2024, labour disputes led to an estimated 31,000 working days lost across the UK, adding another layer of complexity to the labour market’s current challenges.
Employer Response and Future Outlook
Responding to the latest ONS figures, James Cockett, senior labour market economist at the CIPD, highlighted the slowdown in pay growth as a concern for both workers and businesses. Cockett noted, “Today’s figures show a continued slowdown in pay growth, as employers tighten their purse strings. Whilst many of the measures announced in the Employment Rights Bill are pro-worker, employers will be seeking a Budget that can boost business confidence and set out measures to support hiring and increase investment in workforce skills.”
Despite the slowdown in pay growth, Cockett acknowledged the overall strength of the labour market, particularly with falling unemployment and rising employment figures. However, he cautioned that changes to unfair dismissal rules in the Employment Rights Bill could lead to increased costs and risks for employers when hiring permanent staff. This could particularly affect younger workers who may require more support and training as they enter the workforce.
Focus on Economic Inactivity and Workforce Health
The high rate of economic inactivity due to ill health remains a priority for the government. The CIPD continues to stress the importance of improving access to occupational health services and reforming Statutory Sick Pay to help more individuals stay in work. “It’s crucial the government continues the focus on improving access to occupational health services,” Cockett added, underlining the need for policy measures that support the wellbeing of workers and help address the ongoing labour shortages caused by economic inactivity.
As the UK labour market navigates these ongoing challenges, the focus on upskilling, job retention, and employee wellbeing will be key factors in driving future growth and stability.