This month’s labour market statistics show both employment and unemployment up by 0.3 percentage points on the year to 75% and 4.4% respectively. Economic inactivity is down on the year by 0.6 percentage points to 21.5%, but inactivity due to long-term sickness remains sticky at over 2.8 million people. Due to sampling issues with the Labour Force Survey, we must remain cautious in how we interpret such changes.

The headline figures do mask long-term challenges in the labour market. Economic inactivity due to long-term sickness remains at near record levels while youth unemployment (18-24) has ticked up to over half a million. The Government is aiming to increase the employment rate from 75% to 80%, which is equivalent to bringing approximately two million people into work. In recent weeks, it has announced a slew of measures including increasing employment support by about £1 billion with a focus on supporting young people and those with long-term ill-health back to work. However, the success of these measures will also depend on the availability of good quality jobs, and reducing NHS waiting lists.

Warning signs beginning to emerge

While the headline employment and unemployment rates are largely unchanged from a year ago, the labour market is showing some signs of weakness. Vacancies have fallen by 98,000 on the year and until this quarter, had declined consistently since 2022. It appears that the lack of economic growth over the least year is bearing down on the labour market. The rise in employer National Insurance employer contributions, due to take effect in April, is expected to lead to a further slowdown in hiring. The Bank of England’s Monetary Policy report estimated that this tax change is likely to increase business costs by 1.9 percentage points.

Young people might bear the brunt of a slowing labour market

Young people are often the group most affected by a slowing labour market. There are around 503,000 young people aged 18-24 in unemployment which is an increase of over 100,000 on the year. Rising youth unemployment is not always a concern as many young people do have periods of short-term unemployment as they leave education and look for work. However, the employment rate for young people aged 18-24 has been flat on the year, suggesting that young workers are finding it harder to obtain a job.

Spells of long-term unemployment for young people can have scarring effects on their physical and mental health, as well as their future career prospects. Therefore, the Government is right to focus on supporting young people back to work. Its Youth Guarantee will ensure that every person aged 18-21 will get access to education, training or help to find a job or apprenticeship. While this is a welcome step, a weakening labour market risks pushing young workers into low-paid and insecure work. Work Foundation research finds that young people are 2.2 times more likely to be in severely insecure work. Insecure work is not always a stepping stone to more secure work in the future and often traps people into long-term insecurity.

The Government’s plan to deny people under-22 access to the Universal Credit health top undermines its ambitions to boost youth employment and risks delegitimising young people’s health concerns and exacerbating their financial insecurity.

Supporting long-term sick back to work at risk of being undermined by benefit cuts

The number of people who are economically inactive due to long-term sickness continues to remain at near record levels of around 2.8 million, which is an increase of 676,000 since the pandemic (Dec-Feb 2020). The Government launched its Green Paper this week on reforming the benefits system and setting a “pathway to work” for people with long-term sickness and disabilities.

Nearly a quarter of those who are inactive due to long-term sickness indicate that they would like to work, and several changes announced in the Green Paper will help them to do so. For example, a new “Right to try” will de-risk the journey to work by guaranteeing access to benefits to those who try out work and are unable to continue. This incentivises people who have disabilities to look for and try some work without having to worry about losing their benefits.

However, these positive changes risk being undermined by the Government’s intention to cut Universal Credit (UC) sickness benefit and Personal Independence Payments (PIP) by £5 billion, which is likely to lead to some people falling into poverty and destitution.

Cross-government approach needed to reach employment target

The new Labour Government has certainly hit the ground running on reforming the labour market and the welfare state. Its ambition to support young people and those with long-term ill-health back to work are positive steps. However, achieving these goals requires a cross-Government approach. The implementation of greater employment rights and protections, backed by a Fair Work Agency, a robust labour market with good jobs available and shorter NHS waiting lists so that people can access treatment will all be crucial factors in supporting people into good quality, secure work.

Please note: this article does not compare headline figures from quarter to quarter. Rather we examine a longer time frame to ensure that the trends we see in the data are more likely to reflect real changes in the labour market. Caution must be exercised when interpreting any changes in the data.

Related Blogs

• 

  Frosty Days, Festive Ways!

• 

  Taking student issues to Parliament

• 

  The financial career landscape

Disclaimer

The opinions expressed by our bloggers and those providing comments are personal, and may not necessarily reflect the opinions of Lancaster University. Responsibility for the accuracy of any of the information contained within blog posts belongs to the blogger.