HomeJobsRising unemployment points to worrying signs for UK economy

Rising unemployment points to worrying signs for UK economy

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The government has patted itself on the back in recent years for presiding over a period of low unemployment, but underneath the latest headline figures there are concerning trends.

First among the worrying signs is an increase in the number of working age people leaving the labour market because of ill-health, who need to take on caring responsibilities or retire early.

In February, the UK economic inactivity rate for those aged 16 to 64 years was 22.2%, which means about 275,000 more people than a year ago.

In 2022, there was optimism that a sharp rise in the inactivity rate during the three Covid-19 lockdowns was coming down quickly and normality was being restored to the jobs market.

Those who were ill from Covid and its longer-term effects were finding their way back to the workforce and early retirement, which had proved exceptionally popular among the over-55s, was losing its allure.

That trend reversed last year, leaving ministers to scratch their heads about the causes.

Experts in the employment field were in no doubt that the government’s battle with NHS unions and delays to bringing down waiting lists played a big part. Benefit cuts that have reduced payments to disabled people and a mental health service in crisis have also been factors.

Then there is the rise of childcare costs and the increasing price of residential care for older and disabled people that has forced many families to step into the breach, accepting they will work fewer paid hours themselves.

Tony Wilson, the director of the Institute for Employment Studies, was one of many to blame the government’s lacklustre efforts to improve mental health support, and slow response to the rise of school leavers not in education, training or work.

The number of apprenticeship places for young people is low even as childcare businesses struggle to recruit staff.

Charlie McCurdy, an economist at the Resolution Foundation, said rising redundancies and falling job levels were signs of a stagnant economy, “while rising inactivity and long-term sickness suggest there are wider issues with the health of our workforce”.

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He said: “Tackling rising inactivity – and its impact on the public finances, the benefits system, and people’s wider health and wellbeing – is one of the biggest economic challenges facing both this government, and whoever wins the next election.”

Ministers can comfort themselves that the immediate bill from a weak labour market is low. The claimant count for March increased by 10,900 on the month and is up by 57,400 on the year to 1.583 million.

By this measure, unemployment was considered to be resilient. After all, the number of people signing on for unemployment benefits was relatively small when set against a long period of economic stagnation that culminated in recession in the second half of 2023.

However, a fall of 156,000 in the number of people in employment in the last quarter to the end of February on the previous one, gives a clearer sign that all is not well.

Add the wider cost to society from lost economic growth, careers forgone by people needing to care for loved ones and growing ill-health, and the situation is worse than it looks at first glance.

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