The Brief: The Office for National Statistics (ONS) released employment numbers today and revealed a decrease in unemployment rate now at 3.6% from May to July, dropping 0.2 percentage points lower than the previous three-month period (February to April). This is the lowest in 48 years as the number of people not seeking work reached more than 194,000, which includes workers leaving for full-time studies. Job vacancies in the three months to August also dropped to 34,000, which is the largest dip in two years.
Why It Matters: As the labour market is slowly rebounding from the impact of the pandemic, economic inactivity or the number of people who are not actively looking for work and not in work continues to grow, which had its peak at nearly 450,000 in January to March 2020. The ONS reports that as of the three months into July this year, it was recorded at 21.7%, higher by 0.4 percentage points compared in the previous three months, and 1.5 percentage points higher than pre-pandemic levels. Higher rates may drive inflation further, which is already at a 40-year high.
Finanze® Foresights: Increasing levels of people opting to move from employment to inactivity can highly influence chronic shortages of qualified candidates for available jobs. The start of the pandemic has caused many to cite poor health as the primary factor in their decision to leave the labour market. However, today’s declining COVID-19 infection rates and increased public mobility have not been effective at encouraging older workers to return even with lower health risks involved. We view the rise in inactivity therefore as being influenced by personal decisions among older age groups to retire early while younger workers opt to stay in education to further their skills until the economy returns to a more stable state despite the grim prospects ahead due to the headwinds involved.
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