3. Latest labour market estimates

In the latest period, June to August 2019, the UK labour market showed signs of slowing. However, unemployment remained historically low, and wage growth persisted.

Employment

The UK labour market showed signs of slowing, with employment falling by 56,000 to 32.69 million in the three months to August 2019. This was the first quarterly decrease since the three months to October 2017.

The fall in employment was caused by changes in the numbers of men and women. The number of women entering employment has been a strong contributing factor to the current high employment levels, so a fall in their number in employment has had a larger impact on the current level of employment .

There was a decrease in the employment of young people (aged 16 to 24 years) on the quarter. The number of people working full-time increased by 73,000 to 24.16 million, while the number of people working part-time fell by 129,000 to 8.53 million. The fall in the number of part-time workers is the largest decrease since the three months to August 2011 and is the main reason for the fall in employment in the three months to August 2019.

Reasons for working part-time

Figure 1 shows the proportion of part-time working men and women who could not find full-time jobs. For men who worked part-time 17.3% did so because they could not find a full-time job. A much smaller proportion of women who worked part-time (7.9%) did so for the same reason.

Figure 1: Proportion of part-time workers who could not find full-time jobs has continued to fall for both men and women The proportion of part-time workers who could not find full-time jobs, UK, seasonally adjusted, March to May 1992 to June to August 2019 Source: Office for National Statistics – Labour Force Survey Download this chart Figure 1: Proportion of part-time workers who could not find full-time jobs has continued to fall for both men and women Image .csv .xls

The proportion of employees working part-time has fallen consistently since the three months to July 2013, indicating continued tightening of the labour market and falling under-employment.

Unemployment

The number of unemployed people in the UK aged 16 years and older increased by 22,000 to 1.31 million in the three months to August 2019. Although the most recent figures indicate a slight increase in unemployment, the rate is still low by historical standards.

Under-and over-employment

The unemployment rate is an indicator of spare capacity in the economy. The record-low unemployment rate and high vacancy rate in recent periods could mean that those currently in employment might be working more than they would like, implying that they could be over-employed. It is useful to investigate if those currently in employment would like to work a different number of hours from their current hours.

Figure 2 shows the under- and over-employment rates, calculated as the ratio of the number of those employed who would like to work more hours or less hours respectively to the number of all people in employment. The figure shows that before the economic downturn the over-employment rate was higher than the under-employment rate. Those in employment in general wanted to work fewer hours than they were working at the time. This, together with a relatively low unemployment rate, indicates that there was little spare capacity in the economy.

Figure 2: From the three months to June 2014, those in employment generally wanted to work less hours than they worked Under- and over- employment rates, UK, January to March 2002 to April to June 2019¹ Source: Office for National Statistics – Labour Force Survey Notes: Latest figures available. Next release 12 November 2019. Download this chart Figure 2: From the three months to June 2014, those in employment generally wanted to work less hours than they worked Image .csv .xls

After the onset of the economic downturn in early 2008, the over-employment rate started falling while the under-employment increased. From early 2009 to the three months to June 2014, the under-employment rate was generally higher than the over-employment rate. In this period, those in employment in general wanted to work more hours than they were at the time.

The under-employment rate has been volatile but on a downward trend from the three months to March 2014 onwards, reaching a low of 7.4% in the three months to June 2018 and steadying around that level since.

Under- and over-employment rates can mask the differences between the aggregate amounts of more and fewer hours that those who feel under- and over-employed want to work. To get around this, Figure 32 shows the total additional weekly hours for those who are under-employed and the total fewer weekly hours those who are over-employed would like to work. It generally shows the same pattern of over-employment before the economic downturn as Figure 2. However, it illustrates that under-employment and hence spare capacity in the labour market has persisted for much longer when looked at in more detail.

Figure 3: In the latest periods, total additional weekly hours desired have become close to total fewer weekly hours desired Under- and over- employment hours, UK, January ³ to March 2002 to April to June 2019 Source: Office for National Statistics – Labour Force Survey Download this chart Figure 3: In the latest periods, total additional weekly hours desired have become close to total fewer weekly hours desired Image .csv .xls

The total additional weekly hours desired have been greater than the total fewer weekly hours desired between the three months to June 2008 and the three months to December 2017. On an hourly basis, there was more spare capacity in the labour market than on a person basis following the economic downturn. This could potentially explain why real wage growth has not been as strong in the post-downturn period compared with the pre-downturn period. It could also potentially explain why it took longer than expected for real wage growth to accelerate in recent periods. Another possible explanation for weaker than expected earnings growth in the post-downturn period could be the persistently weaker growth of UK’s labour productivity.

Economic inactivity

In the three months to August 2019, the level of economic inactivity in the UK increased by 57,000 to 8.68 million. The inactivity rate increased by 0.1 percentage points to 3.9%. The increase in economic inactivity was entirely among women. Figure 4 disaggregates the different categories of economic inactivity by sex.

Figure 4: A higher proportion of inactive men were students, while proportionally more inactive women looked after family or home Percentage of inactivity by sex and reason, UK, three months to August 2019 Source: Office for National Statistics – Labour Force Survey Download this chart Figure 4: A higher proportion of inactive men were students, while proportionally more inactive women looked after family or home Image .csv .xls

Figure 4 shows the percentages of inactive people by reason for inactivity disaggregated by sex. It shows that a higher proportion of inactive men (35%) were students and that of women (33%) looked after family or home.

Notes for: Latest labour market estimates