This month’s labour market data show stable headline statistics, with inactivity declining by 0.1 percentage point to 20.8, the employment rate up by 0.1 percentage points to 75.8% and the unemployment rate unchanged at 4.2%. Furthermore, although wage growth is levelling off, workers in November 2023 were now earning 1.4% more than they were at the same time last year.

However, as with the previous three months, these are experimental statistics and must be treated with caution.

Unpicking the vacancies puzzle

Vacancies fell for the 18th consecutive quarter to 934,000, but remain above pre-pandemic levels. To interpret these figures, it is important to look at historical trends.

In any given period of time, a high level of vacancies can reflect that businesses are growing and in need of staff, as well as reflect a normal level of churn where workers obtain better jobs and capitalise on their experience and skills. If working as it should, this would improve the match between workers and appropriate jobs and enhance productivity.

On the other hand, a high level of vacancies can indicate that some posts are failing to be filled. In turn, this can mean that some sectors and businesses are coping with churn and persistent worker shortages, which we know is currently the case in sectors such as social care. This can be exacerbated by the prevalence of temporary and other insecure jobs such as agency hires or zero-hour contracts in certain sectors, which mean that even when jobs are filled, employers anticipate attrition and so will still advertise vacancies. Without making any claims as to what the ‘right’ level of vacancies should be, previous trends can shed light on how usual or unusual the current situation is.

Between October-December 2015 and the same quarter in 2019, the number of vacancies grew by 8.9%. During the Covid-19 pandemic, vacancies steeply fell before they reached record levels across 2021 and 2022. This represents a highly unusual situation which the labour market is still recovering from. If vacancies had continued to grow by 8.9% between 2019 and 2023, we would now have approximately 880,000 vacancies. Despite a continuous fall in vacancies, current vacancies remain above that ‘expected’ level, although we do expect to see this fall further over the coming months. This also means that we won’t expect to see much loosening in the labour market until vacancies drop further and it becomes harder for job seekers to obtain work.

Figure 1: Change in levels of vacancies between 2015 and 2023

Source: Office for National Statistics (16 January 2023). Table 21: Vacancies by industry (seasonally adjusted), UK.

This month saw particular declines in wholesale and retail during October to December, falling by 13,000 to 124,000 vacancies. This is curious, as the holiday period is usually a time when vacancies increase. Seasonal hiring tends to ramp up from late summer to November and then falls again from December into the new year. Although the ramping up to the holiday season looked strong, it now appears that hiring was curbed. This could be due to vacancies getting filled and staying filled, or due to a slow down of hiring. As timely data from Indeed Hiring Lab found that interest in seasonal jobs was very high in October, it is likely that lower hiring rates reflected business uncertainty in a challenging landscape.

Is 2024 the year when we’re going to see unemployment rise and the tightness in the labour market break decisively?

We know inflation is forecast to be sticky and continue to put pressure on prices and wages into 2025. Although the real value of wages has seen a slight uptick, this follows on the back of a protracted decline over the past two years. This means that while real wages are going up for some workers, many are still worse off than they were prior to the pandemic and indeed, worse off than they were in 2008.

It is likely that vacancies will continue to fall over the course of 2024. It will be important to track this trend closely, as a decline below the expected level of job opportunities could signal that it will become harder for job seekers to obtain work and result in a rise of unemployment.

To avoid flying blind, policymakers need more information on job quality and security

The monthly labour market data provides us with an understanding of the kinds of businesses and sectors that are hiring, but it provides little information about the kinds of jobs that are available. We know very little about the advertised wages, although this information is available through methods that the Office for National Statistics already uses, such as online jobs boards.

Most importantly, it is key that Government capture and publish data on whether job advertisements are temporary or permanent, offer flexible work, and where they are available. This would help to help interpret changes in levels of vacancies and churn in the labour market. It might additionally provide useful evidence that not all jobs are suitable or indeed even available for many jobseekers to counter a potential pre-Election crackdown on benefits claimants.

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