Inactivity due to long-term sickness increasing

Date : 16 August 2023

The UK labour market is beginning to cool, with unemployment and redundancy rates rising. The number of people economically inactive due to long-term sickness has reached a record level.

The employment rate in the UK fell to 75.7% in the period from April 2023 to June 2023, according to the latest figures from ONS. The employment rate is now 0.9% below the pre-COVID rate of 76.6%.

Unemployment continued to rise on the quarter to 4.2% for April to June. The increase in unemployment in the previous quarter is the largest since August to October 2021.

A rise in unemployment and fall in employment implies that businesses are beginning to cut back on staffing levels. The redundancy rate has now climbed back to the pre-pandemic level of 3.7 redundancies per 1,000 employees.

Vacancies have now been falling for over a year since their peak of 1.3 million. However, the decline is now levelling off, remaining at above 1 million, above the pre-pandemic level of around 800,000.

Slowly falling vacancies and increases in unemployment for a second month confirm that the labour market is cooling slowly. This could impact wage growth in the months ahead, however, currently wage growth is at record levels.

Significant pay growth is being driven by the shortage in labour supply, in part due to economic inactivity.

The picture on economic inactivity continues to improve. The number of economically inactive adults fell by 0.1 percentage points on the quarter to 20.9%. Estimates suggest that there has been a large net movement of people from economic inactivity to unemployment.

However, since the pandemic, the number of those economically inactive due to sickness has been rising and hit a record high of nearly 2.6 million this month.

The number of those economically inactive due to looking after their family or home has declined since the pandemic. This trend has accelerated in recent months, indicating that the cost-of-living crisis may be encouraging people back into the workforce.

Labour shortages across the food and consumer goods industry remain a major issue, as illustrated by the Independent Review into Labour Shortages in the Food Supply Chain.  This continues to impact business capacity and service to consumers.

Labour shortages will be covered as part of our forthcoming Viewpoint Special report - Rebuilding resilience in the UK food supply chain. This will be available to download here from 7 September.

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