With economic recovery continuing, the labour market in the UK remains very strong, with 1,034,000 unfilled job vacancies in July 2021 - a record number.
The unemployment rate is currently around 4.6%, so there are few potential recruits available. EU Exit has made it much harder for UK businesses to recruit from overseas and so wages are rising fast.
There are about 8.7m people in the UK classed as “economically inactive” – this group outnumbers the 1.6m that are “unemployed” (ie: not working, but actively looking for work and ready to begin at once).
The economically inactive are a diverse group, comprising students, the sick, carers, retirees and others. The group has grown in recent years, with increasing numbers of students being a key driver. Eight out of ten inactive citizens do not wish to work.
The rate of pay growth for the economy as a whole is hard to calculate, due to changes in the structure of the working population.
However, IGD calculations, accounting for both inflation and sample effects, suggest that “real” pay growth in the UK was 4.0 - 5.0% in July 2021.
This is the highest rate of real pay growth for at least 20 years – real pay has been fairly flat for some time - suggesting that pressures in the labour market must be especially acute at present.
Other costs for businesses are also coming up (eg: energy, materials) and the inflation experienced by households is rising.
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