The UK unemployment rate for those aged 16 years and over decreased in the latest quarter ended December 2023 to a rate of 3.8%, returning to the rate a year ago, according to the latest estimates by the Office for National Statistics (ONS).

Labour Force Survey (LFS) estimates have been reweighted for periods from July to September 2022, the ONS stated. Headline UK seasonally adjusted series prior to this have been modelled, but other series, including regional, have a discontinuity at this point and because of increased volatility of LFS estimates, estimates of quarterly change should be treated with additional caution.

It added that the ongoing challenges with response rates and levels mean that LFS-based labour market statistics will be considered official statistics in development until further review.

The latest ONS data also showed that the UK employment level for those aged 16 years and over is up both on the year and on the quarter. The UK employment rate (75.0%) for those aged 16 to 64 years remains below estimates a year ago (October to December 2022), but increased in the latest quarter.

The UK economic inactivity rate (21.9%) for those aged 16 to 64 years was largely unchanged in the latest quarter but is above estimates a year ago (October to December 2022). The annual increase was driven by those inactive because they were long-term sick, which remains at historically high levels.

Regional data showed that for the three months ending December 2023, the highest unemployment rate estimate in the UK was in the East Midlands (5.1%) and the lowest was in Northern Ireland (2.6%); London (3.8%) had a record low unemployment rate for the region.

The East Midlands had the largest increase in the unemployment rate compared with the same period last year, increasing by 1.6%, with London seeing the largest decrease of 0.9%.

For the three months ending December 2023, the highest employment rate estimate in the UK was in the South East (78.0%) and the lowest was in Wales (71.1%). London saw the largest increase in the employment rate compared with the same period last year, increasing by 2.0%, with the South West seeing the largest decrease of 2.9%.

For the three months ending December 2023, the highest economic inactivity rate estimate in the UK was in Northern Ireland (26.8%) and the lowest was in the South East (18.8%). The South West saw the largest increase in the economic inactivity rate compared with the same period last year, up 2.6%, with London seeing the largest decrease of 1.3%.

Payrolled employees in the UK rose by 31,000 (0.1%) between November and December 2023 and rose by 401,000 (1.3%) between December 2022 and December 2023. While the number of payrolled employees continues to increase, the rate of annual growth is decreasing.

The early estimate of payrolled employees for January 2024 increased by 48,000 (0.2%) on the month and increased by 413,000 (1.4%) on the year to 30.4 million. The January 2024 estimate should be treated as a provisional estimate and is likely to be revised when more data are received next month.

Meanwhile, annual growth in regular earnings (excluding bonuses) was 6.2% in October to December 2023, and annual growth in employees' average total earnings (including bonuses) was 5.8% in October to December 2023.

Annual growth in real terms, adjusted for inflation using the Consumer Prices Index including owner occupiers’ housing costs (CPIH), for total pay rose on the year by 1.4% and for regular pay rose on the year by 1.8% in October to December 2023.

Annual average regular earnings growth for the public sector was 5.8% in October to December 2023, which is not as high as it has been in recent periods but remains relatively strong; for the private sector this was 6.2%, the lowest since May to July 2022 (6.0%).

The wholesaling, retailing, hotels and restaurants sector saw the largest annual regular growth rate at 7.2%; the manufacturing sector and finance and business services sector both followed at 6.9% and 6.7%, respectively.

In November 2023 to January 2024, the estimated number of vacancies in the UK fell by 26,000 on the quarter to 932,000.

Vacancy numbers fell on the quarter for the 19th consecutive period in November 2023 to January 2024, down by 2.7% since August to October 2023, with the estimated number of vacancies falling in 12 of the 18 industry sectors.

Total estimated vacancies were down by 209,000 in November 2023 to January 2024, from the level of a year previous, although they remained 131,000 above their pre-Covid-19 January to March 2020 levels.

The industry sectors showing the largest annual decreases in the number of vacancies were human health and social work activities, and accommodation and food service activities, which fell by 41,000 and 37,000, respectively.

Further ONS data showed that there were 108,000 working days lost in December 2023 because of labour disputes across the UK. The health and social work industry showed the most working days lost this month.

ONS director of economic statistics Liz McKeown said, “Job vacancies fell again, for the nineteenth consecutive month. However, there are signs this trend may now be slowing. The number of days lost to strikes went up in December, with the majority coming from the health sector. In cash terms earnings are growing more slowly than in recent months, but in real terms they remain positive, thanks to falling inflation.”

Neil Carberry, REC Chief Executive, said, “Today’s data benefits from the return of the Labour Force Survey and tells a clear tale. The labour market softened in the spring and summer of 2023, before a slightly more positive last part of the year as unemployment dropped a little, employment grew a bit and vacancy numbers fell at a slower rate. Given the growth picture, this is a resilient showing, and reflects the business survey data, including our own Report on Jobs.”

“There will be a lot of focus on the pay figures in this release, as pay growth did not fall back as much as expected,” Carberry said. “But with many wage settlements due to take place in the spring, and those from last year still in these figures, we will need to wait for more accurate data on 2024 trends. The significant rise in the national minimum wage will underpin wage growth to some extent this spring, and many companies report that this second significant rise in two years is proving challenging.”

Carberry continued, “The Chancellor can use the Budget to get growth going and boost employer confidence. A long-term plan to tackle skills and labour shortages, economic inactivity and weak productivity is long overdue. The resilience we have seen in the jobs market cannot be sustainable in the long-term unless we see a more significant return to economic growth.”

Michael Stull, managing director at ManpowerGroup UK, said, “As caution holds back some businesses from hiring and causes candidates to move around less freely, what lies beneath that economic ‘surface reality’ should be a greater cause for concern. We’re in murky waters because of ongoing debate about the accuracy and credibility of UK labour market data and the true extent of the impacts that persistent skills shortages, unprecedented technological changes, flat investment rates and stagnant GDP are having on UK productivity, innovation and competitiveness.”

Stull continued, “Are the ‘reweighted’ Labour Force Survey numbers released by the ONS today any more accurate than the ‘experimental estimates’ of recent months? Given the number of revisions we’ve seen over recent weeks, it will take some time before a clearer picture of what’s actually happening emerges. In the interim, we know for certain that hiring appetite is cooling, application rates are spiking, and inactivity rates due to illness are at record levels. Most employers are simply treading water to stay afloat, with the backfilling of existing roles typically a higher priority than creating new jobs for growth.”