The proportion of economically inactive people in the UK who say they would like a job has climbed to its highest level in almost two years, a sign that the cost-of-living crisis is pushing people back to work.
(Bloomberg) — The proportion of economically inactive people in the UK who say they would like a job has climbed to its highest level in almost two years, a sign that the cost-of-living crisis is pushing people back to work.
That finding in official labor market figures released Tuesday could start to ease difficulties companies say they have in hiring staff, reducuing upward pressure on wages and inflation.
The UK’s inactivity rate — or the share of workers who do not have a job and aren’t looking — shot up during the pandemic as people took early retirement or left their jobs due to long-term sickness.
Tightness in the labor market fanned consumer price increases, which are still more than five times the Bank of England’s 2% target and pushed the central bank to raise interest rates sharply.
But data released by the Office for National Statistics on Tuesday showed the proportion of inactive people who want a job hit its highest level in December-February since April-June 2021.
Some 20.2% of inactive workers now want a job, up from 19.2% in the three months to November. The percentage is higher among men than women, who tend to be more likely to say they’re out of work due to care responsibilities.
While the ONS data did not disclose why people wanted to find a job, economists say that the continued rise in prices was squeezing household finances.
“The share of economically inactive people who say that they want a job has ticked up over the last few months,” said Xiaowei Xu. senior research economist at the Institute for Fiscal Studies. “This may reflect cost-of-living pressures drawing people into the workforce.”
The rise in inactivity during the pandemic was particularly pronounced among older workers, many of whom opted to take early retirement. But some are now finding that their pensions aren’t spreading as far as planned, according to Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
“The 71,000 drop in the number of working-age people that are inactive due to early retirement in the six months to February suggests that a combination of the recent fall in house prices, as well as the sharp rise in the cost of living, has propped up labor supply,” Tombs said.
While the ONS data showed unemployment was still close to a rock bottom, and vacancies were still high, Tombs said the rise in the number of inactive people wanting a job indicated that “the labor market is not nearly as hot as the employment figures imply.”
Growth in employment was driven by a rise in the self-employed, as full-time employee positions actually fell.
“Some of the people who recently have become self-employed likely are working less than they would like and so represent hidden slack,” Tombs said.
Other surveys have indicated that firms are beginning to find it less difficult to recruit, he added.
“The recent implicit loosening of the immigration rules — by increasing the minimum salary threshold for skilled migrants by just 2% this year and by putting most construction jobs on the shortage occupation list — likely also will ensure that labor availability continues to improve,” he said.
All of this will help ease the alarm among monetary policymakers at the Bank of England, after wages grew by more than expected in the three months to February. Average earnings excluding bonuses rose 6.6% compared with a year ago, the ONS said, quicker than the 6.2% pace economists had penciled in.
Read more:
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