Economics – Record demand for new workers
17 August 2021New data from ONS shows the current state of the UK labour market – and the news is (mostly) positive.
New data from ONS shows the current state of the UK labour market – and the news is (mostly) positive.
Overall unemployment fell from 4.8% in April 2021 to 4.7% in May 2021, the latest full month. Unemployment has fallen steadily from a peak of 5.1% in November 2020.
For the vulnerable 18-24 year-old age group, unemployment is higher than average 11.0% in May, but this is also receding.
Employment levels are rising, although the number of people in work has not yet returned to the pre-COVID level.
Demand for labour seems strong. The number of unfilled job vacancies stood at 953,000 in Jun 2021, which is a record for the UK.
This ties-in with reports of labour challenges in many business sectors. If sustained, lack of labour may be a barrier to economic growth.
Most furloughed workers are now back at work, at least on a part-time basis - furlough ends in September 2021.
EU workers
IGD’s conversations with food and grocery employers suggest that some EU workers have left the UK due to COVID-19, EU Exit or both. This is a concern, because many food and grocery businesses rely heavily on these workers.
The number of EU nationals employed across the UK fell by about 10% over Q1 2020 to Q1 2021 – no data for the food supply chain is currently available, unfortunately.
Most of these are believed to have secured their right to live and work in the UK via the EU Settlement Scheme (EUSS), so they may choose to return in future, if there is a compelling “case” to do so.
However, it is also possible that more EU nationals may depart the UK in future, if they see better opportunities elsewhere.
Pay
With demand for labour high and supply increasingly short, it is not surprise that pay is rising fast.
Raw data suggests that average weekly pay in June 2021 was up 8.7% annually (including bonuses) or 7.1% annually (excluding bonuses), with most private sector employment showing strong gains. Median pay growth is slightly lower.
This rate of pay growth is unusual for the UK, but may be associated with weak comparables (ie: lower than usual pay in the corresponding period in 2020) and – in particular – “composition effects” (ie: changes in the nature of the sample).
Compensating for composition effects is difficult – there are several possible methods, but none is perfect and none is accepted as “standard”.
ONS suggests that, regular pay may be up 3.5 – 5.0% annually, with compositional effects accounted for. This is still ahead of background inflation, so workers are now becoming better off, in real terms.
So far, there is little sign that higher pay is resulting in inflation for shoppers but this seems likely to occur in the near future.
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