The UK unemployment rate for July to September 2022 decreased by 0.2 percentage points on the quarter to 3.6%, as today’s data by the Office for National Statistic (ONS) showed.
This matched with an employment rate of 75.5% in the same timeframe, a figure largely unchanged from the previous quarter. But the UK jobs market is not as rosy as the unemployment rate might suggest.
Richard Carter, head of fixed interest research at Quilter Cheviot, said that with winter drawing in and increased energy bills starting to really bite businesses’ bottom lines, it remains to be seen how long positive news can last, as it looks “almost certain” that we are heading for a recession.
“The Budget on Thursday will further illustrate the precarious financial position the UK is in and while this fiscal event will hopefully be better welcomed by the markets compared to the mini-Budget delivered by [Liz] Truss and [Kwasi] Kwarteng, it is certainly going to spell pain for public services and bring higher taxes for all further muddying the picture as we head into winter,” he said.
For Myron Jobson, senior personal finance analyst at interactive investor, data on economic inactivity offset the positive narrative as well.
“There was yet another rise in the number of people who are not looking for work due to illness, inertia or early retirement – the so-called economically inactive. The increase was largely driven by those aged 16 to 24 years and 35 to 49 years, with long-term sickness as the main contributor to the rise. It is a worrying stat and reversing the rise is a huge challenge for the government - made harder by the mounting pressures faced by the NHS,” he said.
On top of that, businesses are struggling to fill the jobs they need, a fact that continued to feed into wage inflation. In real terms, pay packets including bonuses fell by 2.6% on the year and by 2.7% on the year excluding bonuses.
Carter noted: “This remains one of the largest falls in pay since 2001. Although there was growth in average pay, it was eclipsed by inflation, meaning that people's pay packets simply will not stretch so far”.
And while inflation is expected to have peaked in October, “following the implementation of the new heightened household energy tariff cap, it is set to remain stubbornly high for quite some time impacting food, travel and car fuel costs”.
“For many taxpayers, the real terms pay squeeze will make this winter one of the toughest in recent times from a financial standpoint.”
Lastly, raises in private sector jobs, with average regular pay growth at 6.6%, were much healthier than the public sector, which was at 2.2%.
Jobson said: “The disparity in pay is likely attributed to private sector employers offering stronger bonuses to attract and retain talent. However, amid fears of a looming recession, firms might feel less inclined to raise wages.
“Employers are also starting to get wary about taking on new people as economic pressures chip away at their margins. The UK economy shrank by 0.2% in the three months to September, which represents the start of what is forecasted by the Bank of England to be a lengthy recession.”