By Donal Laverty, Consulting Partner
Recent economic data suggests the UK is in mild recession, with weak activity starting to take its toll on the labour market.
Office of National Statistics stats for February 2024 released this week show that the unemployment rate has now reached 4.2%. The number of people employed fell more than expected and job vacancies decreased for the 21st consecutive period, highlighting that the once red hot labour market has cooled significantly.
Further challenges are arising through the increasing rate of inactivity in 16–64-year-olds, which now stands at 22.2%. A wide range of historic and current issues concerning young people such as access to education, training, and employment have coalesced to create a situation where employers cannot fill vacancies while high levels of young people are not engaged with the labour market.
During the pandemic and its immediate aftermath, we witnessed the Great Resignation, when huge numbers of employees were leaving the workforce, primarily for financial reasons as wage gains from changing jobs reached record levels by June 2022. However, workers are now quitting their jobs at the same rate as in the six months that preceded the pandemic and are now sticking with the same employer after well above average rates of job switching.
Wage gains are now slowing. Annual growth in regular earnings slowed from 6.1% in January 2024 to 6% in February 2024. This marks the slowest rate of wage growth since October 2022 and a significant fall from the 7.9% peak of July and August 2023.
Employers have reacted positively to the challenges of the recent talent wars. Work for many people has improved over the past two years. Many jobs are paying more, improving benefits, investing in employee wellbeing, and becoming more flexible, inclusive, and diverse.
Given the fluidity of the labour market, a new trend is emerging in workforce data – the death knell of Great Resignation has rung, and we are now in the Great Reshuffle. Employees have begun to shift away from some industries into more sought-after ones. Unskilled or semi-skilled workers are now moving from sectors into new sectors where benefits and wellbeing allow them to work from home. For example, we are seeing cashiers moving to call centre positions to work and enjoy the benefits of working from home.
The labour market continues to flex, both in response to prevailing economic conditions and driven by change as the traditional norms of work evolve into different ways of working, driven as they are by changed employee behaviours, skillsets, and availability.
This article first appeared in the Irish News on 30th April 2024. To discuss any aspect, please get in touch with Donal Laverty E: donallaverty@bakertillymm.co.uk T: 028 9032 3466.