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Work Foundation - Labour market figures provide stark reminder to scale of challenge facing new Government
Ben Harrison, Director of the Work Foundation at Lancaster University responded to the new Labour market overview July 2024 released by the Office for National Statistics
“The labour market figures provide a stark reminder of the scale of the challenge facing the new Government as it seeks to deliver on its commitments to restore stability, improve living standards and support more people into work.
“The latest data has shown the employment rate has fallen to 74.4%. This is down 1.1% on the year, which means Labour will need to see over a five percentage point increase in the rate in future years to achieve their aim of raising the employment rate to 80% – which would be the highest in the G7. Unemployment has risen by 0.4% on the year to 4.4% and economic inactivity due to long-term sickness continues to be at near-record levels at 2.81 million.
“These figures underscore the importance of the new Government delivering on the commitments made in the King’s Speech to reduce NHS waiting times and improve access to mental health support. But there are unlikely to be any quick fixes when supporting those out of work to return, as it will require a wholesale shift in culture within Jobcentres and the wider employment support system from a punitive to a proactive approach.
Wage growth slowing
“Annual nominal wage growth has dropped slightly to 5.7%. This remains historically strong, but growth appears to be on a downward trajectory.
“Despite recent strong wage growth, workers have lived through 16 years of stagnating wages – with pay packets worth little more than they were in 2008. Even with inflation now at the Bank of England’s target rate of 2%, many people are still facing higher mortgage payments and private rates due to high interest rates.
“The slight fall in wage growth may not give Bank of England rate setters confidence to reduce interest rates from their 16-year high, as there are also still concerns about the high levels of CPI services inflation.
Challenges facing the construction sector
“At the heart of its King Speech proposals, the Government pledged to get Britain building and build 1.5 million homes in the next five years. However, the construction sector is facing challenges.
“While the construction industry contains a large minority of self-employed workers, in 2022 over 1.4 million employees worked in the sector. Average wages for construction workers have risen by just 3.0% on the year – which is below all other key sectors. As companies look to ramp up recruitment, we could see wages rise, but increased competition for workers is also likely to raise serious questions about the skills pipeline and the role of immigration in filling potential shortages.”
