Fears grow over rising economic inactivity numbers

More than twice as many people left work because of economic inactivity than unemployment in the three months to October, according to the latest Office for National Statistics figures.

The July-September figures show just 244,000 people became unemployed with unemployment standing at 3.6%, while 623,000 became economically inactive, which includes those who have left work due to early retirement, ill health, looking after family and other reasons. The economic inactivity rate now stands at 21.6%. The ONS says the latest increases were largely driven by those aged 16 to 24 years and those aged 35 to 49 years and by long term health issues and study.

In August to October 2022, the estimated number of vacancies fell by 46,000 on the quarter to 1,225,000. Despite four consecutive quarterly falls, the ONS says the number of vacancies remain at historically high levels.

Growth in average total pay (including bonuses) was 6% and growth in regular pay (excluding bonuses) was 5.7% among employees in July to September 2022 – well below inflation, but marking the strongest growth in regular pay seen outside of the coronavirus pandemic period.

The figures show the widening gap between private and public sector pay. Average regular pay growth for the private sector was 6.6% in July to September 2022 and just 2.2% for the public sector.

The Institute for Employment Studies says the economic inactivity figures show that the Government should put more effort into giving people the right support to get back to work, given the number of unfilled vacancies and the shrinking economy.

Tony Wilson, Director at the Institute for Employment Studies, said: “There are now 630,000 more people out of work than before the pandemic began and today’s figures show clearly that people aren’t becoming unemployed, they’re leaving the labour force altogether. Our analysis shows that once people become economically inactive they are less and less likely to come back to work, with the number off work for five years or more growing by more than 200,000 in the last few years.

“Our Commission on the Future of Employment Support launched last week showed that a large part of the problem is that people just aren’t getting the right help to get back into work. The number of jobseekers using Jobcentre Plus has halved over the last decade while the government’s Restart scheme is set to underspend by over a billion pounds. With more than a million unfilled vacancies, a shrinking economy and falling living standards, cutting access to employment support is a complete false economy. The Budget on Thursday needs to put this right, in particular by opening up Restart to more of those who are out of work and want help to get back in.”

Meanwhile, a Chartered Management Institute (CMI) survey of more than 1,000 employers shows employers are warning that acute labour shortages are having an impact on productivity. More than nine in 10 employers say staffing shortages are hitting morale. And a survey from the Chartered Institute of Personnel and Development [CIPD] says UK companies are planning their biggest pay rises in a decade, in part due to retention fears as a result of labour market shortages, although real-term wages will still grow more slowly than inflation. Its survey found that British employers expect to raise their basic pay rates by 4% on average over the coming year, and by as much as 5% in the private sector – the largest such increases since the CIPD’s records started in 2012. The CIPD also notes that 69% of employers plan to hire in the next quarter.

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