UK labour market shows signs of cooling

Date : 15 February 2023

In new UK labour market data released by ONS, the UK labour market begins to show signs of cooling slightly as the wider economic environment has an impact.

In October to December 2022, unemployment remained low at 3.7%, but was up 0.2% on the previous three-month period. The UK employment rate also rose slightly, up 0.2% higher than the previous period.

Conversely, average weekly hours worked between October and December has fallen by 1% when compared with the June to August period. This indicates reduced economic output and an increase in part time work.

Businesses are beginning to take action to cut staff as a response to the challenging economic environment with the redundancy rate rising to 3.5 per 1,000 employees in October to December.

Whilst this figure has been rising in recent months in response to the worsening economic environment, it remains well below the peak 12.2 following the 2008 recession.

Job vacancies fell by a further 20,000 to December 2022. Vacancies are now 166,000 below their peak of 1.3m in April 2022. However, vacancies remain high compared to their pre-pandemic levels.

Falling vacancies and increasing redundancies raises questions of the ability of people to cycle back into the workforce.

Click chart to enlarge

Click chart to enlarge

The number of economically inactive people in the UK is beginning to fall. The chart above illustrates the cumulative change in economically inactive people across the economy since the beginning of the pandemic.

A continuation of the slow decline of those defined as economically inactive could indicate that the cost of living crisis is driving people back into work. A dramatic fall in the number of students defined as economically inactive, shown in the purple bar above, has been the primary contributor to this downward movement.

There is little evidence that those over 50’s are yet to be tempted back into the workforce, with the number of those between 50-64 defined as economically inactive rising over the period.

(Economic inactivity refers to people of working age who do not have a job and are not actively searching for one.)

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