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Unemployment rate rises to 3.9%

In the three months to June 2019, employment increased by 115,000 to reach a record high of 32.81m and unemployment increased by 31,000 to 1.33m. The employment rate remained unchanged at 76.1% over the same period.

The increase in employment was driven by women whose employment increased by 127,000 to a record high of 15.55m. The employment rate for women increased by 0.3 percentage points to reach a record high of 72.1%.

The number of unemployed people increased by 31,000 on the quarter to 1.33m. The unemployment rate increased by 0.1 percentage points on the quarter to 3.9%. The increase in the level of unemployment was driven by unemployed men who increased by 40,000 to 740,000, and the unemployment rate for men increased by 0.2 percentage points to 4.1%.

The latest Labour Force Survey estimates show that the number of economically inactive people fell by 47,000 to 8.56m in the three months to June 2019. The economic inactivity rate reduced by 0.1 percentage points on the quarter to a joint record low of 20.7%.

The latest estimates from the Vacancy Survey show that vacancy levels in the UK economy decreased by 22,000 to 824,000 in the second quarter (April to June) of 2019. Vacancies have been on a downward trend since the three months to January 2019.

Most of the vacancies in the UK economy (733,000) were in the services sector, reflecting the dominance of services in the economy. A disaggregated analysis of the services sector shows that the highest number of vacancies were in the wholesale and retail sector (133,000) and in the human health and social work activities sector (137,000).

In the year to June 2019, average weekly earnings experienced substantial growth. Average weekly earnings can either be total average weekly pay (which includes bonuses) or regular average weekly pay (which excludes bonuses). The latest earnings data show that total average weekly pay for the whole economy grew by 3.7% in the year to June to reach £538. This was the highest growth rate recorded since June 2008.

Disaggregating total average weekly pay into private and public sectors shows that total average weekly pay in the private sector grew by 3.9% in the year to June to reach £536. Total average weekly pay in the public sector also grew by 3.9% in the year to £542.

Pawel Adrjan, UK economist at Indeed, commented, “This snapshot of the UK labour market is very much a tale of two halves. Unemployment has risen, but for those in work, paypackets are swelling nicely - average wages are rising at their fastest level for more than a decade.

“The increase in unemployment is a case of economic gravity finally reasserting itself as Britain’s job creation boom slows. 

“The total number of vacancies continues to slide further from the peak it reached at the start of the year, suggesting more employers are holding off on hiring.

“Our analysis shows that total vacancies rose in only two out of 12 employment sectors - education and health and social work - with all the others seeing a fall.

“Yet for all that, the labour market is one of the few parts of the economy to have largely shrugged off the growth-sapping uncertainty that has stymied progress elsewhere.

“The total employment rate has improved, rising back up to the joint-record high it achieved earlier this year. 

“And there is more good news for those who already have a job. Average wages continue to march upwards at their highest rate since August 2008 as employers fight for recruits by offering ever more competitive salaries.

“This is far from a perfect jobs report. Employer caution is limiting the supply of new vacancies, yet stiff competition for recruits is still driving up wages. Given the wider slowdown in the economy, the labour market is holding up surprisingly well. But continued falls in vacancies suggest employers are mindful of the broader economic and political risks on the horizon.”

Ben Keighley, founder of Socially Recruited, commented, “The modest rise in unemployment has brought no respite to the battle for talent. The intensity of the competition between employers for the best recruits is now driving up average wages at the fastest rate for more than a decade.

“While the wider economic slowdown has led some companies to throttle back on recruitment – as evidenced by the gradual fall in the number of vacancies – the fact remains that the labour market is still very tight. The employment rate has notched up once again, and with Britain effectively at full employment there is almost no slack in the jobs market, meaning those who need to hire are having to fight harder – and smarter – to win recruits.

“On one level this is leading to steady increases in salaries. Average wages are now rising at their fastest level since 2008. But employers are also finding new ways to poach recruits from their rivals, and we’re seeing an increasing focus on people who are not even actively job hunting – with recruiters using a range of sophisticated approaches to encourage people to try something different. At the same time, growing companies need to shore up their own teams by offering good training and perks. Britain’s job creation boom may be easing, but the competition for the best staff remains as intense as ever.”

Neil Carberry, chief executive of the Recruitment & Employment Confederation, said, “Dropping productivity is a huge issue and will constrain the ability of the economy to sustain rising pay. Addressing skills shortages is part of the answer to this conundrum. Up and down the country businesses are struggling to find the skills they need – as REC’s Report on Jobs shows. Reforming the apprenticeship levy to help temporary workers progress is a vital part of filling gaps, but this must be paired with a sensible approach to immigration for work.

“The kind of unrealistic salary threshold proposed by the Home Secretary would starve sectors like IT, engineering, and agriculture of the people they need to drive prosperity for all of us – not to mention the huge damage it would do the NHS.

“It’s time for government to work with businesses to design policies that work on skills and immigration. Recruiters are ready to step up – and have a huge role to play as hiring mistakes cost UK businesses millions of pounds every year, as our research shows. Good, inclusive recruitment underpins productivity. Recruiters are local labour market experts, a valuable resource in helping businesses find great employees.”

Julia Kermode is chief executive of The Freelancer & Contractor Services Association (FCSA), shared, “There were 820,000 job vacancies for May-July 2019, which is 20k fewer than the same period last year, and 20k fewer than the previous quarter.  Alongside this, temporary employment was the only form of work to decrease this quarter, with 52k fewer people working in this way.  Businesses appear to be tightening their belts in relation to hiring decisions, which seems inevitable given the current political and economic uncertainty in the wake of Brexit.  Despite this, the UK’s employment rate continues to be at an all-time high since comparable records began in 1971, and 15.1% of those in work are self-employed.   Today’s figures show that the economy is once again relying on the flexibility of self-employment to see us through the tough economic times that we are currently facing.  I would therefore urge policymakers to acknowledge their value and nurture these workers rather than penalise them with red tape and more legislation.”

Gerwyn Davies, Ssenior labour market aAdviser at the CIPD, said, "The UK labour market continues to stand strong despite the current political and economic headwinds. Employer demand for workers remains robust, which is partly being met by a relatively sharp increase in the number of non-UK nationals in employment. A significant proportion of migrants workers are filling skilled vacancies, especially in healthcare, which may not otherwise be filled. Non-UK citizens are therefore playing an essential and complementary role to the demands of the UK labour market. It is key that the UK's future immigration system is flexible and responsive to the specific skills needs of the UK economy.

“The tightening labour market, especially in sectors such as construction, is clearly putting pressure on firms to raise wages for staff. Looking ahead, organisations need to address their workforce pipeline challenges before migration restrictions hit them hard - improving pay on its own will not be enough.” 

David Morel, CEO of Tiger Recruitment, added, "Economic forecasts might be shaky, but conditions are still favouring jobseekers, who have seen a 3.7% increase in pay across the country, according to the latest ONS figures. In fact, our own figures show an even more positive picture, with (predominantly London-based) new hires seeing an average 11% boost in their salaries in July – up from 5% in June - indicating that the candidate-short market and battle for quality talent is certainly driving up salaries.

"ONS also reported an increase in the number of non-UK workers, driven by EU nationals. While this is may be surprising, in light of Brexit, one driver could be an increase demand for languages - our own placements requiring a language rose from 2% in June to 11% in July. We’ve found that, as many businesses open European offices, particularly in Germany, with a view to boosting links with Europe, this is driving a significant increase in the requirement for multi-lingual support staff." 

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