An unprecedented event happened in England. For the first time in recorded history, the number of unfilled vacancies in the UK exceeds the number of unemployed. The national unemployment rate currently stands at 3.7%. Lowest level in nearly 50 years. The number of vacancies posted has reached 1.3 million. However, there are several other worrisome developments that disturb the positive outlook. Wages could not keep up with the rise in the cost of living due to, among others, a substantial increase practicality receipt. We provide an overview of the current situation in the job market and how the latest developments could impact UK workers and UK businesses.
Finding qualified employees will be extremely difficult for business owners
Unemployment has not been low for a very long time. Below, we see an overview of the evolution of unemployment levels over time. As we can see in the chart, the employment rate has fallen to its current level over the past 30 years. In fact, the current unemployment rate is the lowest level in nearly 50 years.
As for the number of vacancies, especially after the covid-19 pandemic recovered, the numbers are exactly the opposite as we can see below.
These two opposing trends have dire consequences for employers and business owners. Finding qualified people to stay for the long term is very difficult. With companies spending countless resources and time before being able to find the right person for the vacancy. And with people’s new tendency to jump jobs to see them raise their wages when new opportunities arise is also a headache for businesses. It is increasingly common for employees to quit their jobs after just a few months to look for new opportunities and take advantage of higher wages to combat the cost of living.
Cost of living increased more than salary increase
One worrisome sign for workers is the mismatch between the rising cost of living and rising wages. Wages increased 4.2% between January and March 2022. However, this is much lower than the 7.0% increase in the cost of living during the same period. Especially energy crisis and the aftermath of the Ukraine war has hit energy prices heavily and has seen electricity and gas Bills skyrocket. An even more worrying development is the disparity between the public and private sectors in terms of wage growth. Wages in the financial and business sectors increased by a staggering 10% while the public sector grew only 1.2%. On average, when adjusted for gains, real income has fallen by an average of 1.2% over the past period. This is the largest decrease in 9 years.
What is the outlook for workers and employers in the coming months?
The Ukraine War could see the unemployment rate start to rise again towards the end of the year. Employment rates always lag behind economic growth, and war will have negative consequences for the economy. Reduced demand for jobs and thus potentially increased unemployment.