The labour market is still red-hot in the UK, but falling real wages means that we’re seeing a tale of two economies.
Next Tuesday, the Office of National Statistics (ONS) will release the July labour market overview. Despite concerns about sky-high inflation and a potential recession, the UK job market is still strong. The number of payrolled employees and job vacancies continue to grow and remain historically high, particularly in face-to-face industries including healthcare and hospitality. However, overall vacancy growth has begun to slow.
Here are three trends we’ll be watching for in the ONS July labour market overview:
- Rate of growth in job vacancies to continue to decelerate, if not fall. As the economy shows clearer signs of a slowdown, vacancy growth will likely continue to decelerate and possibly even fall.
- Regular real wage growth to remain negative. Real growth in regular pay (excluding bonuses) has consistently remained below inflation for the past several months. With year-over-year inflation in the Consumer Price Index (CPI) hitting a 40-year high of 9.1% in June, this trend looks set to continue. And continuing the pattern from previous months, growth in total pay is likely to be slightly positive, with high bonuses making up for some of the loss to inflation.
- Economic inactivity to fall for students and rise for long-term sick. In 2020, there was an uptick in those who were neither working nor looking for work (the ‘economically inactive’) due to being in university – unsurprising, considering that many people seek to pursue educational opportunities to improve their knowledge during a recession. These elevated numbers continued during much of 2021, but as we reach the end of the academic year with a bumper labour market, many of these students will be leaving school and no longer economically inactive. On the other hand, the numbers of economically inactive due to long-term illness have ticked up over the past year, perhaps due to increased long COVID. With coronavirus rates again on the upswing, expect to see a slight increase in this measure. Overall economic inactivity rates have been inconsistent (sometimes up, sometimes down) and will likely remain so.
Employee Fears of Recession, Inflation & Redundancies On the Rise
Examining more than 200,000 posts and comments by UK-based employees on Fishbowl by Glassdoor, a social networking platform for professionals, discussions mentioning redundancies have nearly doubled (+84 percent) in the last year. In fact, mentions of ‘redundancy’ over the last two months are now at their highest level since January 2021, though they are still significantly lower than their 2020 peaks.
Discussions of recession have risen more dramatically – up more than tenfold since March 2022 and even higher than in March 2020 when the pandemic began. However, such discussion still remains a relatively low proportion (less than 1 percent) of all comments and posts on Fishbowl by Glassdoor, suggesting that while recession worries are on the rise they’re not employees’ sole concern.
In addition, as the cost of living crisis takes hold in the UK, worries about inflation are surging, with mentions on Fishbowl by Glassdoor up 252 percent from June 2021.
Employees Still Burnt Out and Overworked – but Are Employers Heeding the Call?
Between the shortage of workers and skyrocketing inflation, it’s no surprise that workers feel stressed out and overwhelmed. During the depths of the pandemic lockdown, discussion about workload (‘overwhelmed’, ‘overworked’, ‘understaffed’, etc.) in UK-based Glassdoor reviews dropped, ramping up again as pandemic-related restrictions began to ease and demand surged. Mentions of burnout show a similar pattern, up 48 percent in the last year, although mentions appear to have settled in recent months.
Although the labour market remains strong, fears about recessions and layoffs are rising and employees feel burnt out and overwhelmed. Inflation and the cost of living crisis are top of mind for many employees, as the July labour market overview is likely to show another month of negative real wage growth. While vacancy levels are at record highs, growth has been slowing for the past few months and appears likely to continue to do so.