If Sir Keir Starmer wins the election, he will quickly face a crisis that Rishi Sunak has failed to resolve. Photo: Jonathan Hordle/ITV
At first glance, the UK labor market looks to be in excellent shape. New data from the Office for National Statistics shows that wages are rising rapidly and companies are still hiring, fueling economic growth that Rishi Sunak has dubbed “gangster bandits”.
But the reality is not so good. Unemployment is rising. Employment is falling. And a record number of working-age adults say they are too ill to even think about working.
It's terrible news for the winner of next month's general election.
At a time when government finances are already extremely tight, fewer people working means tax revenues could be weaker than expected. Record unemployment could also lead to higher benefits costs.
Despite sharp increases in wages (average earnings, excluding bonuses, rose 6% last year), those who are working have also not yet recovered purchasing power they lost last year. Cost of living crisis.
This risks exacerbating the new government's economic woes, with weak spending likely to slow economic growth and harm VAT revenue.
Here are the charts that show the growing jobs crisis is Britain's biggest election nightmare.
The new government's biggest headache is unemployment.
The population has risen sharply since the last election in December 2019, with three quarters of a million more people of working age in the country than there were when Boris Johnson won a landslide majority.
p>Yet despite this, affordable the workforce was reduced by 16,000.
The reason is economic inactivity: since 2019, the number of people aged 16 to 64 who are neither working nor looking for anything has grown by almost 780 thousand and exceeded 9.4 million.
People may be inactive for a number of reasons, such as school, but long-term illness has particularly risen sharply. This is a double whammy for government finances because not only are these people not paying taxes, but they are also likely receiving benefits.
At the same time as inactivity has increased, the number of people working has decreased. Despite population growth, there are 184,000 fewer people in work than in 2019, and unemployment, which covers those looking for work and who may be starting a new job but have not yet found a job, rose by 168,000.
This is particularly concerning for economic growth. According to Tony Wilson, director of the Institute for Employment Research, almost all economic growth in recent years has been driven by growth in the number of people working.
“For the last 20 years or more, economic growth has been driven by growth in employment, not productivity. So when employment stops growing, the economy stops growing,” he says.
“That’s why large increases in economic inactivity and job stagnation really make a big difference to the economy and living standards.”
< p>Sunak said GDP growth of 0.6% at the start of the year was a sign that his economic plan was working and “things are starting to look better.”However, this is reflected in the decline in the number of people in work . may turn out to be a short-term phenomenon.
“Almost all of this is caused by more people spending long periods of time without work – fewer people coming to work, not more people leaving work, which is a problem,” says Wilson.
Companies continue to hire enthusiastically, with more than 900,000 positions available. That's down from the post-lockdown peak of 1.3 million, but still above pre-pandemic levels when the economy was creating jobs in the first place.
Most of the pre-Covid job growth was driven by dynamic developing private sector. Businesses grew rapidly and needed more workers.
At the same time, the government sought to save money and shrink the public sector.
Recently, this situation has been observed to reverse.
Employment in the private sector is declining – over the past 12 months it has lost almost half a million jobs. Employment fell in retail trade, manufacturing, construction, information and communications, and administrative jobs.
This suggests the economy is weakening and businesses are struggling to achieve the strong growth they had hoped for after the pandemic. The future could be worse when the baby boomer generation retires, removing more experienced workers from the job market.
In contrast, the public sector is bloated, increasing the burden on the taxpayers who fund it.
>< p>The government currently employs nearly six million people, with the number increasing by 125,000 in the last year, making the state the largest since 2012. More than two million of these public sector employees work in the NHS.
< p>An expanding public sector masks the true state of the economy. The headline figures showing a modest decline in employment do not reflect the underlying health of the economy, but rather are the result of large government spending aimed at hiring more workers.
All of this is important for GDP growth and government finances, which rely on attracting more people to work.
While workers are employed in the private sector, they generate more taxable economic activity.
Wages are rising faster than inflation, which should also provide an influx of funds into the treasury. But there are reasons for concern.
The typical worker is still worse off than before the cost of living crisis.
The average pay packet is down about £10 a week in real terms from mid-2021 levels and is still a hair below the level it was at before the financial crisis, after years of inflation and weak wage growth. /p>
This suggests that a spending-led surge in economic growth is unlikely. The government cannot rely on the feel-good factor to encourage people to buy more, which will help grease the wheels of the economy.
Unemployment is at the root of all these problems. Economic growth is slowing, public finances are strained and wages are faltering because too few people are working and paying tax.
Rishi Sunak and Jeremy Hunt are acutely aware of the problem: unemployment records are being repeatedly broken. under their supervision. But so far the Conservatives have failed to find a solution, despite repeated attempts.
If, as current polls suggest, Sir Keir Starmer and shadow chancellor Rachel Reeves replace their Downing Street rivals next month, they will face exactly the same problem – and may well face difficulty in dealing with a meaningful problem of unemployment.< /p>
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