Record numbers return to work – just as work starts to wobble
We’re being driven back to work. There was a record flow out of economic inactivity in the year to October-December – driven by people moving into work. Real wages are falling. After CPIH inflation, real pay (including bonuses) fell 3.1% and regular pay (excluding bonuses) fell 2.5%. It’s one of the largest falls since records began in 2001.
And the market is softening. Vacancies fell 76,000 in the quarter to 1.134 million – the seventh consecutive fall since summer 2022. The unemployment rate was 3.7%, up 0.1 percentage points from the previous quarter, but down 0.2 percentage points from before the pandemic.
The ONS has released employment and wage data for the year to October-December: UK labour market: February 2023 – Office for National Statistics (ons.gov.uk)
Helen Morrissey, head of pension analysis, Hargreaves Lansdown said: “The great unretirement helped drive a record number of people back to work in the year to October-December. After an exodus from the workplace during the pandemic, more people are swapping the sofa for the office chair again.
“The rising cost of living will be playing a part, as people are realising their pensions may not go as far as they had expected. However, we also know some of these people stopped work because of long term sickness, so better health may have encouraged them to reconsider a return to work.
“Unretirement isn’t the full picture though, because young people aged 16-24 played a major role in the fall in inactivity. One of the reasons given for being inactive in the first place was studying – so some of this is seasonal, as students emerge from education and enter the workplace.”
Sarah Coles, head of personal finance, Hargreaves Lansdown said: “Our wages gained an inch or two of ground against runaway inflation, but we’re still miles behind – and there’s little chance of us catching up in the coming months. The tight labour market, which forced private sector employers to hike wages, is easing. It means the pace of rises may well slow, leaving us to close the gap on inflation ourselves.
“If you ignore inflation, wages are a powerhouse, with total pay (including bonuses) up 5.9% and regular pay up 6.7% – the strongest growth rate for regular pay outside the pandemic. However, it’s a bit like saying if you ignore all the people who are good at running, I’m one of the fastest people on the planet. Once you factor it in, real pay fell 3.1% and regular pay fell 2.5%. It’s one of the largest falls since records began in 2001. Life is even tougher for workers in the public sector, where total pay was up just 4.2%, compared to 7.3% in the private sector. It’s one reason why there were 843,000 working days lost to labour disputes in December – the highest number since November 2011.
“It’s hardly surprising that the HL Savings & Resilience Barometer shows that at the moment more than a third of us (35%) aren’t earning enough to cover our expenses -so are either eating into savings, building up debts, or being forced to make difficult cuts. Given that all sorts of prices are set to rise in April – from council tax to energy bills, there’s a real risk that an awful lot of people will be struggling.
“If you’re spending savings, or borrowing more, it’s essential to be aware that for some people, things are set to get even worse as the labour market weakens. Vacancies have dropped for the seventh consecutive time, with employers citing economic uncertainty as the key reason for holding back, and we’re seeing a small increase in unemployment. It means we can’t assume that our incomes will continue uninterrupted in the coming months, so if there’s any way to cut our way to a balanced budget, we need to do everything possible to stay on top of our finances.”