This week has been described by some as Keir Starmer’s ‘legacy week’. The ban on social media and the G7 summit in Evian were meant to show what this Prime Minister has been able to achieve at home and abroad for the safety of us all.
No. 10 disputes that it is anything about legacy, of course, and says it actually demonstrates a Prime Minister who puts country over party and is determined to fight on. Whatever the truth, figures just released by the Office for National Statistics (ONS) cement what Starmer should really be remembered for.
New recruits in British firms hit their lowest level in five years, while 138,000 jobs disappeared from payrolls in the year to April and 53,000 in a single month. It is not just existing jobs that have disappeared: vacancies continued their decline too. Job adverts fell by 19,000 in the last quarter, hitting their lowest level since April 2021, with declines in ten of the 18 sectors that the ONS keeps an eye on.
‘But look, you’re ignoring the good news!’ Starmer and his Chancellor would say, pointing to the fact that the unemployment rate has fallen to 4.9 per cent. But that figure is deceptive. While the rate fell by 0.3 percentage points over the last three months, it did not correspond to a 0.3 percentage-point increase in the employment rate, which remained unchanged. Instead, that 0.3 percentage points moved to economic inactivity – those out of work and not looking for it either – with the rate increasing by exactly the same 0.3 percentage points.
The positive spin from banks and think tanks tells us something concerning
That has to worry us. According to ONS statisticians, the latest increase in inactivity was driven by 16- to 24-year-olds and 35- to 39-year-olds, thanks to an increase in carers and students not looking for work.
Meanwhile, on the pay front, the gap between public- and private-sector wage rises reopened. Public-sector wages are now rising at 5.1 per cent annually, while private-sector pay growth has slowed to 2.9 per cent. It goes without saying that a growing public sector, both in size and cost, is not something that seems compatible with an economy in which job destruction is its defining feature.
Despite all this, the reaction from the economic wonk world this morning is that today’s release should be taken with cautious optimism: unemployment is down and there have been upward revisions to payroll data. But beneath those headlines, I do not see the same positives from fewer jobs, fewer vacancies and the incentive structures within pay in our economy continuing in the wrong direction.
The positive spin from banks and think tanks, however, tells us something more concerning: economic mediocrity in Britain has become acceptable. At best, the loosening of Britain’s job market is slowing down. But surely we should want to turn it around too?
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