Experts have cautioned that the UK’s job market, which has been strong since the economy started to recover from the epidemic, may be about to change.
The unemployment rate decreased to 3.6% in the three months leading up to July, the lowest level since 1974, however, there were also decreases in employment and the number of open positions.
Regular income increases are also falling short of rising living expenses.
The boss of Reed stated that “the jobs boom that started six months after the epidemic is coming to an end presently.”
James Reed, the company’s chairman, said in an interview with the BBC’s Today programme: “There are still a lot of job openings and individuals are still advertising a lot of opportunities, so that’s why we’ve seen unemployment continuing.
What happens next is the crucial question. Will there be a decline in jobs? Although there are still a lot of job openings and many firms are still having trouble filling positions, our data at this time does not support that.
A surge in the number of persons who are no longer looking for work and are thus not counted in the figure is one factor contributing to the decline in the unemployment rate. The Office for National Statistics (ONS) said that the inactivity rate increased to 21.7%, the highest level since 2017.
The pay pressure persists as well because increases in regular salary have lagged behind inflation. The value of regular pay decreased by 2.8% after accounting for price increases, according to the ONS.
The newest figure, which will be released on Wednesday, is expected to be higher. Inflation, which is a gauge of price increases, is still at a 40-year high of 10.1%.
The ONS numbers also showed the continuing difference in pay increases between the private and public sectors.
programFrom May to July, the private sector experienced an average regular wage gain of 6% compared to 2% for the public sector. The biggest gap between the private and public sectors has ever existed, outside of the height of the pandemic, according to the ONS.
Even as the unemployment rate dropped to its lowest level in 48 years, other indicators suggested that the labor market may be starting to turn.
Between June and August, there were 34,000 fewer job openings than there had been in the previous two years, but overall there are still a lot of openings.
Additionally, the employment rate decreased slightly from the prior three months to 75.4%.
The decline in the unemployment rate, according to the EY Item Club, obscures some job market fragility.
According to Martin Beck, senior economic adviser to the EY Item Club, “the reduction in unemployment hid what was only a modest 40,000 growth in employment, the smallest since January to March, with a spike in inactivity having a significant role in pushing unemployment down.”
“Additionally, the figures for a single month revealed that the number of people working fell by the most since January 2021 in July compared to three months earlier. This shows that the job market is beginning to suffer as a result of the sluggish economy.”
There are some indicators of a change here, even while the headline jobs data are still solid with the unemployment rate at its lowest in over 50 years and long-term unemployment down.
First off, the lower unemployment rate is more indicative of fewer individuals actively looking for work than it is of a jobs boom. According to the most recent statistics, this is a result of a record number of long-term unwell people. Record NHS waiting lists may have an economic impact on this area.
The most recent employment figures are still a bright spot amid some otherwise gloomy economic skies. Other factors in this situation reflect the broader cost of living issues.
Real compensation continues to drop precipitously, particularly for employees of the public sector. This is true despite some strong salary growth in cash terms. And vacancies are still at a high level despite a declining economy. Businesses are being constrained by a lack of labor, which could cause inflation to rise for longer.
At a historic low, there is one unemployed individual for every open position, and the positions are not being filled. But things will need to alter if the administration wants to “push for growth.”
The largest manufacturer, distributor, and designer of small household appliances in the UK is RKW, which was founded by Rob Sutton.
He claims his salary cost has increased by more than £2.5 million over the last two years and employs 500 employees in Stoke-on-Trent, West Midlands.
Because things are moving so quickly, he remarked, “We have to assess our wage costs every month.”
It’s been a complete disaster since we constantly have to raise [wages], which means that nothing is now becoming cheaper.
His company is growing, and he is trying to hire more employees, but it has proven difficult.
He claims that there are possibly 20 openings that remain unfilled.
“There has been a severe shortage of order picking and warehouse operators, therefore recruitment companies have visited our employee parking lot and placed letters on the windscreens of the cars stating, “We will give you £1,000 to come and join the company.
“That’s primarily because a lot of the European staff left before Covid,” said the speaker.
Businesses have expressed concern about the negative impact of the tight labor market.
“Firms are struggling to survive in a time of rising expenses, and they also have to deal with an extraordinarily tight labor market, which further limits their ability to invest and expand,” said Jane Gratton from the British Chambers of Commerce.
We cannot allow recruitment issues to further impede growth at a time when inflation is rising and the economy is sluggish.
The Institute for Employment Studies’ director, Tony Wilson, issued a similar caution: “Firms just can’t find the workers to fulfill their jobs.”
With pay growth in the private sector currently running above 6% and adding to even higher prices, this is not only slowing down growth but also driving up inflation.
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