Depth of worklessness crisis revealed as ONS finds 400,000 more dropouts
Office for National Statistics (ONS)
Tim Wallace
Mon, 5 February 2024
UK workers
Britain’s jobless crisis is worse than previously thought as new estimates show more than 400,000 extra people have dropped out of the labour market amid record long-term sickness.
There are now 9.25 million people aged between 16 and 64 who are not working nor looking for work, according to the Office for National Statistics (ONS), meaning they are officially classed as “economically inactive”.
Officials have revised the figures upwards because the adult population is almost 750,000 bigger than previously expected, fuelled by greater levels of immigration.
There are 172,000 more people in work than previously realised, as well as 30,000 more unemployed. There are also an additional 414,000 who are inactive, amid a growing trend of long-term sickness.
A total of 2.8m people have dropped out of the jobs market because of their health, a record high. This is around 200,000 higher than previously estimated. In part this is thought to be due to a rise in the number of older workers, who are disproportionately likely to be unwell.
Former cabinet ministers said the figures underlined the urgency needed by Rishi Sunak to get a grip on worklessness. Tory leader Sir Iain Duncan Smith said: “Long term sickness has spiralled since Covid.
“The Government needs to put all their focus on bringing them all into Universal Credit so they can be incentivised back into work, and cut taxes to help incentivise those on middle incomes back into work as well. Work remains the best route out of poverty.”
Sir John Redwood, another former cabinet minister, said unless action is taken, it will affect the balance between those who are out of work on pensions and benefits and those in work who are paying taxes to pay for these.
“This encourages governments to allow more people in as legal migrants, which is cheap for the employer but expensive for the taxpayer because it will mean extra spending on social housing and health spending etc. We are already paying for the public service needs of people who are already here.”
Sir John added that the figures could also make it harder for the Bank of England to cut interest rates from a 16-year high of 5.25pc.
“Another concern is that if your income tax and working tax revenue is down and public spending is up, this leads to bigger deficits which make it harder to bring interest rates down,” he said.
Andrew Bailey, the Bank’s Governor, has stressed he is worried the tight jobs market is causing high pay rises, potentially fuelling sustained inflation.
Huw Pill, the Bank’s chief economist, said on Monday that while it remained “premature” to discuss rate cuts at the current juncture, he noted that the “outlook for monetary policy has shifted” and it was now a question of “when, rather than if” the Bank would begin loosening policy.
He added that as underlying domestic inflationary pressures started to wane “we can begin to reduce” interest rates.
The ONS also found more women in the workforce than previously thought. As women are more likely to take time out of work to care for relatives, this pushed up the number of people who are looking after their home or families by 108,000.
There are also an extra 142,000 students.
Tony Wilson at the Institute for Employment Studies said the increase in sickness means the economy is missing out on extra growth.
“It means the economy is underperforming. We could be doing better. We could have more people in employment, more output and a stronger economy, if we could get better at helping people to prepare for work, get into work, and help those in work to stay there,” he said.
The new data points to an unemployment rate of 3.9pc, below the 4.2pc previously estimated.
George Buckley, economist at Nomura, said the Bank “might see a tighter market which means there are fewer people available to work, and that means there is more upward pressure on wages”.
“This is helpful to the cause that the MPC will keep rates on hold for longer,” he said.
Signs of growing strength in the economy also risk pushing the Bank to keep rates high.
Britain is surging ahead of France and Germany as rate cut hopes drive the strongest growth in the UK’s services sector since May 2023, new data shows.
Activity rose for the third month in a row as expectations of Bank of England interest rate cuts this year boosted consumer and business confidence, driving a jump in new orders.
By contrast, low output and high labour costs are driving fears of stagflation in France and Germany.
However, there are also lingering signs the cost of living crisis is still hitting families’ finances.
Retail sales in January were up 1.2pc compared to the same month of 2023, according to the British Retail Consortium. This is below the rate of inflation and so indicates households spent more money to take home fewer goods. While families increased spending on food by 6.3pc, they cut back by 1.8pc on other products.
Meanwhile, EY warned refinancing debt could cost British companies an extra £25bn because of higher interest rates.
The Big Four accountant said refinancing costs have risen by as much as 6pc since 2022, as the Bank of England has lifted interest rates to bring the post-pandemic surge in inflation under control.
Higher borrowing costs will hit UK-listed companies now preparing to refinance £500bn of lending over the next three years.
It comes amid fresh warnings from the Centre for Economics and Business Research that Britain faces a record number of corporate insolvencies this year as companies which were hit hard by the pandemic shut their doors.
Tim Wallace
Mon, 5 February 2024
UK workers
Britain’s jobless crisis is worse than previously thought as new estimates show more than 400,000 extra people have dropped out of the labour market amid record long-term sickness.
There are now 9.25 million people aged between 16 and 64 who are not working nor looking for work, according to the Office for National Statistics (ONS), meaning they are officially classed as “economically inactive”.
Officials have revised the figures upwards because the adult population is almost 750,000 bigger than previously expected, fuelled by greater levels of immigration.
There are 172,000 more people in work than previously realised, as well as 30,000 more unemployed. There are also an additional 414,000 who are inactive, amid a growing trend of long-term sickness.
A total of 2.8m people have dropped out of the jobs market because of their health, a record high. This is around 200,000 higher than previously estimated. In part this is thought to be due to a rise in the number of older workers, who are disproportionately likely to be unwell.
Former cabinet ministers said the figures underlined the urgency needed by Rishi Sunak to get a grip on worklessness. Tory leader Sir Iain Duncan Smith said: “Long term sickness has spiralled since Covid.
“The Government needs to put all their focus on bringing them all into Universal Credit so they can be incentivised back into work, and cut taxes to help incentivise those on middle incomes back into work as well. Work remains the best route out of poverty.”
Sir John Redwood, another former cabinet minister, said unless action is taken, it will affect the balance between those who are out of work on pensions and benefits and those in work who are paying taxes to pay for these.
“This encourages governments to allow more people in as legal migrants, which is cheap for the employer but expensive for the taxpayer because it will mean extra spending on social housing and health spending etc. We are already paying for the public service needs of people who are already here.”
Sir John added that the figures could also make it harder for the Bank of England to cut interest rates from a 16-year high of 5.25pc.
“Another concern is that if your income tax and working tax revenue is down and public spending is up, this leads to bigger deficits which make it harder to bring interest rates down,” he said.
Andrew Bailey, the Bank’s Governor, has stressed he is worried the tight jobs market is causing high pay rises, potentially fuelling sustained inflation.
Huw Pill, the Bank’s chief economist, said on Monday that while it remained “premature” to discuss rate cuts at the current juncture, he noted that the “outlook for monetary policy has shifted” and it was now a question of “when, rather than if” the Bank would begin loosening policy.
He added that as underlying domestic inflationary pressures started to wane “we can begin to reduce” interest rates.
The ONS also found more women in the workforce than previously thought. As women are more likely to take time out of work to care for relatives, this pushed up the number of people who are looking after their home or families by 108,000.
There are also an extra 142,000 students.
Tony Wilson at the Institute for Employment Studies said the increase in sickness means the economy is missing out on extra growth.
“It means the economy is underperforming. We could be doing better. We could have more people in employment, more output and a stronger economy, if we could get better at helping people to prepare for work, get into work, and help those in work to stay there,” he said.
The new data points to an unemployment rate of 3.9pc, below the 4.2pc previously estimated.
George Buckley, economist at Nomura, said the Bank “might see a tighter market which means there are fewer people available to work, and that means there is more upward pressure on wages”.
“This is helpful to the cause that the MPC will keep rates on hold for longer,” he said.
Signs of growing strength in the economy also risk pushing the Bank to keep rates high.
Britain is surging ahead of France and Germany as rate cut hopes drive the strongest growth in the UK’s services sector since May 2023, new data shows.
Activity rose for the third month in a row as expectations of Bank of England interest rate cuts this year boosted consumer and business confidence, driving a jump in new orders.
By contrast, low output and high labour costs are driving fears of stagflation in France and Germany.
However, there are also lingering signs the cost of living crisis is still hitting families’ finances.
Retail sales in January were up 1.2pc compared to the same month of 2023, according to the British Retail Consortium. This is below the rate of inflation and so indicates households spent more money to take home fewer goods. While families increased spending on food by 6.3pc, they cut back by 1.8pc on other products.
Meanwhile, EY warned refinancing debt could cost British companies an extra £25bn because of higher interest rates.
The Big Four accountant said refinancing costs have risen by as much as 6pc since 2022, as the Bank of England has lifted interest rates to bring the post-pandemic surge in inflation under control.
Higher borrowing costs will hit UK-listed companies now preparing to refinance £500bn of lending over the next three years.
It comes amid fresh warnings from the Centre for Economics and Business Research that Britain faces a record number of corporate insolvencies this year as companies which were hit hard by the pandemic shut their doors.
No comments:
Post a Comment