December's Market Insights

Labour Market Overview

The latest ONS Labour Market Overview shows that: 

• The UK unemployment rate edged up slightly to 4.3%, equating to 1.508 million people unemployed.
• Unemployment increased and remains significantly high among younger age groups: 

• Aged 16-17: 24%
• Aged 18-24: 12.7%

• The employment rate decreased marginally to 74.9%, with 33.77 million people in work.
• The economic inactivity rate remained stable at 21.7%, similar to 12 months ago. There are 9.337 million people economically inactive, consistent with last year but 703,000 higher than pre-pandemic levels.
• Job vacancies fell again to 818,000, marking the 29th consecutive period of decline, down by 31,000 compared to the previous quarter. Despite the fall, vacancies remain above pre-COVID levels. This equates to 1.8 unemployed people per vacancy for August to October 2024, an increase from the previous quarter.
• The number of payrolled employees in October 2024 stood at 30.37 million, an annual increase of 75,979 and 1.33 million higher than pre-pandemic levels.
• Annual growth in regular pay (both with and without bonuses) was 5.2%. Adjusted for inflation: 

• Regular pay grew by 5.4%
• Total pay increased by 4.3%

• The claimant count, which measures those receiving unemployment-related benefits, increased both monthly and annually to 1.769 million.
• Redundancies rose to 3.4 per 1,000 employees, a slight increase from the previous quarter and year.
• 42,000 working days were lost to labour disputes in October, down from 48,000 in the previous month.

The Guardian reports on the Office for National Statistics (ONS) inability to fix Labour Force Survey until 2027. The ONS Chief Executive, Ian Diamond, has written to the chair of the cross-party committee of MPs saying his ‘ambition’ is to introduce a new, more accurate data series in 2026, but it may not happen until a year later. The chair has said “These delays will make some of the most consequential decision taken by the Treasuery and Bank of England challenging at best and misinformed at worst”. 

The Resolution Foundation reports that official labour market data has ‘lost’ almost a million workers, and is over stating the scale of Britain’s economic inactivity. The Foundation’s analysis suggests that there could be 930,000 more people in employment than the latest official figures suggest, and that the current 16-64 employment rate could be around 76 per cent (as it was pre-pandemic), rather than its official rate of around 75 per cent. 

The ALP’s latest Labour Supply Chain survey highlights ongoing challenges in the labour market, with 67% of labour providers unable to meet all client demands and 14% of businesses reporting persistent shortages of lower-skilled workers. Rising costs are adding further strain, as labour providers struggle to pass on expenses while employers contend with tight margins and increasing wages. Government schemes appear to be falling short, with only 20% of labour providers finding Jobcentre support helpful and just 3% valuing return-to-work initiatives. Concerns about ‘Make Work Pay’ reforms, including guaranteed hours and day-one rights, reveal mixed opinions on how businesses will adapt. 

The CIPD’s Autumn 2024 Labour Market Outlook provides some optimism, showing a net employment balance with more businesses hiring than reducing staff. Public sector employment confidence has returned to positive territory, although hard-to-fill vacancies remain a significant issue. Median basic pay increases remain at 3%, with the public sector expected to see rises of 4%. 

The Bank of England’s November 2024 Quarterly Monetary Policy Report offers a mixed perspective. Employment growth has remained modest, while the Labour Force Survey indicates a decline in economic activity rates since the pandemic, though this data is uncertain. The unemployment rate has shown little change over the year. Despite some easing, the labour market remains historically tight, with spare capacity in firms close to long-term averages. 

Indeed’s Hiring Lab 2025 UK Jobs & Hiring Trends Report adds further insights, noting that the UK economy outperformed low expectations in 2024 but has slowed in recent months, raising concerns over the labour market. The report highlights muddled data caused by faulty labour market metrics, a labour market that remains tight, limited redundancy notifications, and falling job postings across nearly all occupational categories. Additionally, zero-hours contracts have been gradually rising ahead of upcoming policy changes. 

The Office for Budgetary Responsibility (OBR) warns that Britain’s workforce is set to shrink to record lows, with economic activity projected to fall from its 2019-20 peak of 64% to just 61.8% by the 2060s, driven in part by a surge in ill health impacting employment.

Supporting evidence from the Joseph Rowntree Foundation and Scope highlights that health and lack of workplace support are major barriers for disabled people, with Jobcentre services often failing to meet their needs. Similarly, research from the Institute for Employment Studies links poor job quality—characterised by insecurity, excessive hours, lack of control, and inadequate workplace support—to negative health outcomes. The Work Foundation adds that workers facing health declines, particularly those with poor mental health or multiple conditions, are at higher risk of leaving the workforce, with nearly two-thirds of employers reporting that employee health issues harm business performance.  

Flexible working emerges as a critical solution, with inflexible workers four times more likely to exit the workforce after health challenges.

The Working Families Benchmark 2024 underscores the growing importance of flexible working, family-friendly cultures, gender equality, and wellbeing practices among leading employers.

• 62% of top employers report that over three-quarters of their staff now work flexibly, with smaller organisations leading the way, as 100% of their employees work flexibly compared to 59% in larger organisations.
• Flexible working is proving advantageous for employers too, with 54% reporting reduced business travel costs, 51% saving on building expenses, 42% experiencing increased productivity, and 36% seeing lower staff turnover.

The Government has published the Get Britain Working White Paper detailing its proposals to reform employment, health and skills support to tackle economic inactivity and support people into good work. The £240m initiative includes plans to reform the job centres, widen access to work and learning opportunities for young people and review the role of employers in making work more accessible for people with disabilities and health conditions. 

The Department for Education provides support to businesses as part of the Skills for Life initiative to help with staff recruitment and skills development. There are 10 training and employment schemes available including apprenticeships, Multiply (free maths course for over 19s), Sector Based Work Academy Programmes and Employing Prisoners. There is easy access to information on each scheme, the costs and where to find out more information. 

The Home Office’s latest immigration statistics for the year ending September 2024 reveal that 241,719 work-related visas were granted to main applicants, a 28% decrease from the previous year but still 76% higher than in 2019. Notably, ‘Temporary Worker’ visas reached 77,719, marking a 7% year-on-year increase and an 89% rise compared to 2019, driven largely by growth in the ‘Seasonal Worker’ visa route. 

Meanwhile, the government has intensified its crackdown on visa abuse, with forthcoming legislation set to increase sanctions on employers who commit serious breaches. Employers found guilty of major violations will now face a ban on hiring overseas workers for at least two years, doubling the previous one-year penalty, aligning with a Labour Party manifesto pledge to address the issue.

The Migration Observatory highlights broad trends in its briefing on net migration to the UK. Net migration reached an unusually high 728,000 in the year ending June 2024, driven by an increase in non-EU arrivals. However, net migration is projected to decline from 2025 onwards, although the outlook remains uncertain. The report also notes a shift in migration patterns post-Brexit: while EU citizens previously accounted for the majority of net migration, EU net migration is now negative.