The number of job vacancies in the UK has fallen for the eighth consecutive month and the number of payrolled employees is increasing, according to official data.
Ahead of the “back-to-work” Budget tomorrow, labour market figures from the Office for National Statistics paint a cautiously encouraging picture for the chancellor.
In December 2022 to February 2023, the estimated number of vacancies fell by 51,000 to 1.124 million. The ONS said the eighth consecutive decrease reflects uncertainty across industries, as survey respondents continue to cite economic pressures as a factor in holding back on recruitment.
Economic inactivity decreased by 0.2 percentage points on the quarter, to 21.3% in November to January, with the fall driven by people aged 16 to 24 years. The unemployment rate for the same period was largely unchanged at 3.7%.
Average total pay including bonuses increased 5.7% while regular pay (excluding bonuses) rose 6.5% in November to January. Regular pay growth remains higher for the private sector (7.0%) than the public sector (4.8%). On a month-to-month basis, there is some evidence that pay growth is starting to stall.
Labour market figures March 2023
Adjusted for inflation, pay fell by 3.2% for total pay and by 2.4% for regular pay, the biggest decline since 2009, when it fell by 4.5%, but still among the largest falls in growth since comparable records began in 2001.
There were 220,000 working days lost to labour disputes in January, down from 822,000 in December.
Charlie McCurdy, economist at the Resolution Foundation think tank, said: “The chancellor and the Bank of England will both cautiously welcome today’s release, with early signs that labour market activity is improving and pay growth generating less inflation. But the chancellor still has work to do to return employment back to its pre-crisis highs.”
Joanne Frew, global head of employment and pensions at DWF, said: “Employees are demanding more pay and it is often the case that the employer simply cannot meet the demand. Employee engagement has never been more important. Employers are looking at new and innovative ways to attract and retain talent – from increased flexibility such as ‘work from anywhere’ policies to offering employee discount schemes.
“Whilst retaining a core productive workforce is key, inevitably some employers will be considering restructuring in the near future which will impact the labour market in the short to medium term. Further, the latest figures show that between December 2022 and February 2023, the estimated number of job vacancies fell by 51,000 over the quarter, with economic pressures resulting in a cautious approach to recruitment.
“However, overall the number of vacancies remains high increasing the pressure on the government to encourage people who have dropped out of the working population to return to the job market.”
In a policy move aimed at reducing early retirement, the chancellor is expected to announce tomorrow that the total amount that workers can accumulate in pension savings before paying extra tax is to increase to as much as £1.8 million over their lifetime, up from £1.07 million currently. Jeremy Hunt may also increase the £40,000 annual cap on tax-free pension contributions, to around £60,000.
Lily Megson, policy director of My Pension Expert, said: “For certain, ‘early retirees’ will come into Hunt’s crosshairs. For months now he has heralded his intention to get over-50s back into work in an effort to tackle economic inactivity, with those who retired during the first two years of the Covid pandemic a particular focus. Reports suggest that increasing the lifetime allowance and the £40,000 annual cap on tax-free contributions to pensions are among the Budget’s policy reforms that will support Hunt’s attempts to keep people working longer.
“However, while such changes would come as a boost to some, the underlying issue is that the chancellor risks demonising those who do not want to work until their late 60s. Instead of trying to force retirees back into employment, the government ought to empower them to plan for the future they want and deserve. Namely, the Budget should include plans to ensure more people can access the information and advice they need to make informed decisions, putting them in control of their retirement plans.”
Jonathan Boys, senior labour market economist for the CIPD, commented: “Some measures suggest a cooling labour market. Vacancies continue to fall for the eighth consecutive time indicating a softening of demand for staff, but unemployment remains incredibly low at 3.7% indicating there are fewer available candidates. This highlights the need for the chancellor’s Budget to focus on a broad range of measures to boost labour market supply and help more people to get back into work.
“Pay is still rising but prices are rising faster and each month the cost-of-living crisis casts more gloom on family finances. Though inflation is coming down, prices still rose by 10.1%, eclipsing today’s figures which show regular pay growing at 6.5%. A pattern that we are getting used to now is the gap between public and private sector pay. The former grew at just 4.8% while the latter grew by 7%. This will make recruitment and retention in the public sector harder as time goes on.”
He said that policymakers should focus on boosting labour supply from all age groups and that there is an urgent need to reform the apprenticeship levy into a training and skills levy. CIPD research found that there are more 16 to 24-year-olds not working but who would like to work, than there are 50 to 64-year-olds, despite the latter being the focus of reducing economic inactivity.
“More funding is needed for apprenticeships for young people and increased flexibility for employers to train their existing workforce through other forms of training and development,” he added.
Tania Bowers, global public policy director at the Association of Professional Staffing Companies (APSCo) said: “The decline noted in vacancy numbers isn’t a surprise given the current economic climate. However, the fact that the final dataset to be unveiled before tomorrow’s Budget shows that unfilled vacancies remain over one million shows the critical state of the labour market across the UK. When we also consider the changes in payrolled employment, we can see that the shortage of workers is only growing.
“While the number of vacancies is continuing to fall, estimates for payrolled employees are on an upward trajectory that started in February 2021 and aren’t showing signs of slowing. With widespread reports of difficulties recruiting the highly skilled professionals needed to support the economy over the course of the last two years, this uptick in the number of people on payrolls while vacancies remain significantly high is a concern.”
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