Unemployment declining but inactivity is growing

On the positive side, demand for labour is still high, despite a deteriorating economic situation. Unemployment was very low from May to July at 3.6%, the lowest rate since May to July 1974.

The chart below shows that while redundancies remain low, the number of unfilled vacancies is very high at 1.26m despite declining by 34,000 from the previous quarter.

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At 35.8m, the number of employed people in June rose by 290,000 on the quarter and for the first time exceeds the pre-coronavirus level of December 2019.

However, the chart below shows that economic inactivity (ie: not working and not seeking work) continues to increase. The increase during the latest three-month period was driven by those inactive because they are students or long-term sick.

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For businesses, it is unlikely these people will return in considerable numbers to solve the labour shortages.