Written by Nick Litsardopoulos (Research Economist), IES.
On the 17th of December 2024 the ONS published its last Labour Market Overview for 2024. Most of the indicators paint a positive picture for the labour market. However, ONS discusses extensively in the report the limitations of the data from the Labour Force Survey (LFS), and notes that “As external sources suggest that recent increases in LFS measures of employment are likely to be overstating underlying employment growth”, arguing that ONS “would advise caution when interpreting changes in headline rates”. Overall, we see that a combination of indicators from the ONS and HMRC suggest that the UK’s labour market is not doing very well, but in general the situation has improved since the pandemic. While these are good news, the fact is that the pandemic was an extraordinary period that makes for a rather low baseline.
If the labour market is doing well, then surely less people would be out of work. Until of course we get to some futuristic outcome where robots do all the work and people enjoy a lifestyle of comfort and leisure. Until this future arrives, people still need to work for a living. A healthy economy should have a robust and dynamic labour market. A good indicator of a healthy labour market is wage growth that is matching or exceeding inflation, for which the opposite points to an unhealthy economy. Another indicator is the stock and flow of available jobs.
The December ONS Labour Market Overview shows that vacancies have continued to fall since the short-lived post-pandemic recovery period that saw a large increase in vacancies. The ONS estimates a quarterly change of -31,000, that is 31 thousand less vacancies, but notes that since the quarter of Jan-Mar 2020, there has been an increase by 22,000 vacancies. PAYE data from the HMRC also suggest that the latest monthly change is about -35,000, that is 35 thousand less employed people, but on a positive note more people are employed now than at the beginning of the pandemic.
Using Adzuna’s Intelligence Portal we can look at the development of job vacancies postings and attempt to predict what the new year might have in stock for us. Even though Peter Drucker had argued very astutely that trying to predict the future might be similar to trying to drive down a road in the dark without any lights while looking at the back window, it is also true that “It is far better to foresee even without certainty than to not foresee at all” (Henri Poincare). With this wisdom at hand, we plot the job vacancies postings from the Adzuna intelligence portal for the period April 2019 to April 2024, roughly covering the last 5 fiscal years. What the chart below shows is the stock and flow of job vacancies. That is, the ongoing job vacancies over time (stock) and the new job vacancies postings (flow). The chart also plots the 3 months moving average of the total, that is, stock plus flow.
The vacancy data from Adzuna accurately captures the fall during the extraordinary period of the pandemic along with the steady increase in job vacancies postings after the lockdown. Since roughly the end of 2021 when the most recent maximum was reached, alas with a double top, the number of vacancies has been decreasing. The 3-month moving average maps a smooth but steady decrease in the number of total vacancies. This could be linked to the slowdown of new business creation. Even more alarming for the coming days in UK’s labour market is the increase in redundancies from a minimum in May 2022 of 1.8 per 1000 to a 3.1 per 1000 in the December report.
We extend the analysis by plotting the most recent data of the new job vacancies postings (Flow) from Adzuna, covering the first months of the 2024-2025 fiscal period, from April 2024 until Dec 2024.
Based on the additional data analysis of the ongoing 2024-2025 fiscal year the trend in the flow of new job postings clearly indicates a shrinking labour market. If there is a negative flow of job vacancies postings then sooner or later the total number of vacancies will inevitably stagnate when new hires cover the existing vacancies. The cascading effect of declining job vacancies suggests a complex economic adjustment mechanism where businesses become increasingly cautious about hiring, ultimately potentially triggering a self-reinforcing cycle of economic contraction. Then again, the advent of new technologies and particularly the advances in Artificial Intelligence (Ai) and the dissemination of Ai business tools across the vast number of industries may already be having a positive impact on effective production through the enhancement of human skills and capabilities, so that fewer employees are required to maintain the desired level of output. Maybe a future where robots do all the work and humans enjoy a lifestyle of comfort and leisure is possible, even though the road ahead may be long.
IES is an independent, apolitical, international centre of research and consultancy in public employment policy and HR management. It works closely with employers in all sectors, government departments, agencies, professional bodies and associations. IES is a focus of knowledge and practical experience in employment and training policy, the operation of labour markets, and HR planning and development. IES is a not-for-profit organisation.
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