24 October 2023

Unemployment rate unchanged but signs point to cooling jobs market

24 October 2023

The UK jobless rate remained unchanged in the latest three months amid mounting signs that Britain’s jobs market has cooled.

Estimates from the Office for National Statistics (ONS) revealed that the unemployment rate stood at 4.2% in the three months to August, the same as in the previous three months, under a new calculation adjusted for low survey responses.

It comes after official figures last week revealed that real earnings are outstripping inflation for the first time in nearly two years.

But there was also a mixed picture for the wider jobs market after last week’s figures showed pay growth starting to ease back for the first time since January, job vacancies falling for the 15th time in a row and an 11,000 drop in UK workers on payrolls during September.

The latest “experimental” figures had been delayed by a week due to a low response to its labour force survey, and the ONS said it has used extra data sources to estimate the figures, including more real-time payroll data.

The ONS said this provides a more “holistic view” of the labour market while the traditional survey statistics are uncertain.

Darren Morgan, ONS director of economic statistics, said: “This is part of our transformation of the way we measure the labour market where we are introducing an improved Labour Force Survey, asking more people in different ways about their employment status.”

The data showed that the inactivity rate among those aged 16-64 remained unchanged at 20.9% when compared with the three months to July.

It also revealed that 119,000 working days were lost to industrial disputes in August, with the majority of the strikes in the health and social work sector.

Junior doctors and hospital consultants have staged a series of strikes in a long-running dispute over pay and conditions in the English NHS.

Earlier figures from the ONS showed regular earnings rose by a near record 7.8% in the three months to August and were 0.7% higher with Consumer Prices Index (CPI) inflation taken into account.

Revised figures from the ONS also revealed wages have been out-pacing inflation since the three months to July, with wages rising faster than prices for the first time since October 2021.

However, earnings growth eased back from 7.9% in the three months to July in a sign that firms are starting to hold back on wage hikes.

Vacancies also dropped for the 15th time in a row – down 43,000 quarter on quarter to 988,000 in the three months to September – in a further sign that Britain’s jobs market is cooling in the face of a barrage of interest rate hikes and economic worries.

Jake Finney, economist at PwC UK, said: “The UK labour market remains tight but is cooling, with unemployment rising, vacancies declining, and pay growth slowing.”

The latest data showed there were 1.4 million unemployed in the three months to August while the employment rate also remained unchanged at 75.7%, with 31.6 million in jobs.

When compared with the three months to May, the UK jobless rate edged up to from 4% to 4.2%, with 74,000 more jobless people, the ONS said.

Martin Beck, chief economic adviser to the EY Item Club, said the newly calculated data complicates the reading for the jobs market, but suggests that the loosening in the labour market looks “slightly less significant than before”.

He said that despite this, unemployment is still rising faster than the Bank of England expected.

Mr Beck added: “The Monetary Policy Committee (MPC) will be mindful about the potential for revisions in the new jobs measure.

“But alongside an absence of surprises in recent pay and inflation data, the latest labour market numbers offer another reason to think that the MPC will keep Bank Rate on hold when it meets in November.”

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