Despite vultures apparently circling the UK economy, the ONS recently announced that unemployment in the UK had fallen to just 3.5%... it’s lowest level since 1974. So exactly what is going on in the UK labour market?
Well put very simply, it’s a question of supply and demand. The post-Covid upturn in economic activity coincided with a number of the biggest supply side shocks to hit the UK for many years. It was to be expected that Brexit and the introduction of stiffer requirements for entering the UK would reduce the flow of labour seeking work here…but Covid meant that the previously expected influx of people prior to the December 31st 2020 didn’t happen as they were not allowed to travel.
Here you go…
Covid also led to a huge increase in the number of economically inactive people…with many taking early retirement or choosing to stay in education…as well as the number of people off long term sick hitting a recent peak of 2.5 m.
On top of this, the recent levels of economic uncertainty has caused many who might ordinarily dip their toe in the employment market to decide to stay put...very much a case of better the devil you know.
So overall what we have been facing in recent times is a perfect storm of things conspiring to tighten candidate availability whilst demand has seen a peak that far outstrips the pre-Covid levels.
Looking more locally and talking about our anecdotal experience as an agency, the Summer months definitely saw a more significant downturn in overall candidate activity that in previous years. My assumption here is that people embraced being able to travel wherever and do whatever they wanted in the Summer for the first time since 2019…in many cases taking 2 or even 3 holidays…their 2022 one and the ones that were cancelled in previous years.
On a positive note, we did see candidate registrations step up significantly in September when the schools went back… but since then – and looking at the numbers so far in October – it has plateaued. My belief is that the economic uncertainty and cost of living crisis – not helped by the mini-budget and subsequent turbulence in the markets – has led to people being much more wary about a) whether or not to look for a new role and b) if they do decide to look, being very picky about what they go for.
The orthodox approach would suggest that if we do indeed enter a period of recession, there might be more people on the market as people lose jobs etc…but my intuition, knowledge and experience tells me that given the gap between supply and demand in the labour market, the overarching shortage of good people and friction in the candidate market will remain for some months…slowly improving and gaining some sort of equilibrium over time.
Our recommendation to employers is to continue to work on their employee offering and related areas such as the D&I agenda in order to maximise the talent pool they are “fishing” from and their attractiveness as a prospective employer when they do engage with people. To some extent – and as with almost every business – you are at the mercy of the market… but it will get better and Hewett will be working very hard to ensure we capitalise on this on behalf of our clients.
For further advice and insight regarding the current labour market, get in touch below.