Responding to the new Labour market overview May 2024 released by the Office for National Statistics, Ben Harrison, Director of the Work Foundation at Lancaster University said:

“While the UK might be out of a technical recession, today’s data suggest the UK's labour market participation crisis deepens further. Employment is down compared to this time last year and 0.5% on the quarter, while unemployment and economic inactivity are both rising.

Unemployment rises and long-term sickness at near record

“Today’s figures estimate unemployment has ticked up to its highest level since last summer at 4.3%, while economic inactivity due to ill-health is up by a third compared to pre-pandemic levels and is now a near record 2,820,000.

“With vacancies still high, the Prime Minister has announced plans to overhaul the UK’s benefit system to get more people with long-term health conditions working. But the Government’s focus on extending welfare sanctions risks pushing these people even further away from the labour market.

“Since January to March 2023, on average, the number of people who are economically inactivity due to ill health has risen by 295 people a day. It is vital that the Government works closely with employers and other agencies to stem the flow of people who are leaving work due to sickness.

“And as one in three people (633,000) who are long-term sick report they want to work, the Government must prioritise de-risking the journey back to secure and sustainable work for those people with tailored employment support.

Pay growth historically strong, but workers poorer than in 2008

“Nominal wage growth remains historically strong at 6%. The impact of energy and food inflation on income has waned, and workers are seeing a 1.9% real pay rise on the year. However, the UK’s ten-month wage recovery may slow in the coming months as inflation levels off and with only 30% of British firms planning above inflation pay rises in 2024.

“While many employees may be better off compared to last year, most workers will be feeling poorer than in previous decades. According to the OBR, the UK is still in an 18 year period of wage stagnation with most workers poorer than they were in 2008 – and long-term pay growth lags behind other comparable nations such as the US, France and Germany.”

Notes

• Amount of people becoming long-term sick per day is calculated by: inactive due to long-term sickness per day: (2,820,000-2,712,000)/366
• Pay rise data is from Shifting Priorities (8 May 2024) – using data from a YouGov survey of 1,000 senior business decision-makers (11 and 19 March 2024)
• Rent data is from Double Jeopardy: Insecurity at home and work (April 2024).