1. Main points

  • The UK unemployment rate fell to 4.4% in the 3 months to June 2017 – the lowest it has been since 1975.

  • The employment rate reached a new record high of 75.1%.

  • Real average weekly earnings fell by 0.5% in the 3 months to June 2017, both excluding and including bonuses as consumer price inflation continued to outpace growth in wages.

  • The inactivity rate fell to a new record low of 21.3%.

  • Among the inactive women, the proportion of those who are students reached a record high of 21.1%.

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2. Main labour market indicators

UK employment rate reaches a new record high

Estimates from the Labour Force Survey show that there were 32.07 million people in work in the 3 months to June 2017, which was 338,000 more than for a year earlier and 125,000 more than for January to March 2017. There was an increase in full-time employment (up 91,000) to a record high of 23.58 million and part-time employment (up 34,000) to 8.49 million compared with 3 months ago. There was an increase in the number of people in self-employment (up 21,000) since the 3 months to March 2017. By age category, there were increases in the number of employees for three age groups: 25 to 34, 35 to 49 and 50 to 64. The level of employment decreased for three age groups: 16 to 17, 18 to 24 and 65 and over. The employment rate was 75.1% in the 3 months to June 2017, the highest since comparable records began in 1971 (Figure 1).

Total weekly hours increased since the 3 months to March 2017 by 4.4 million to a record high of 1034.2 million. Average actual weekly hours for all workers were unchanged compared with 3 months ago at 32.2 hours. Compared to 3 months ago, average hours for full-time workers increased marginally to 37.6 hours while average hours for part-time workers remained unchanged at 16.3 hours. The number of vacancies fell by 16,000 in the 3 months to July 2017 compared with the previous quarter.

Figure 2 shows rates of nominal and real wage growth over a 9-year period from June 2008. These data show that regular weekly earnings for employees (excluding and including bonuses) in Great Britain increased by 2.1% compared with a year earlier. Once adjusted for inflation (measured using the Consumer Prices Index including owner occupiers’ housing costs – CPIH), average weekly earnings fell by 0.5% (including and excluding bonuses) over the year.

UK unemployment rate falls to its lowest since 1975

The unemployment rate declined by 0.2 percentage points in the 3 months to June 2017 compared with 3 months ago to 4.4%, its lowest since 1975 (Figure 1). The total unemployment level decreased by 57,000 compared with 3 months ago to 1.48 million. Unemployment decreased for three age groups: 16 to 17, 25 to 34 and 35 to 49, it increased for three age groups: 18 to 24, 50 to 64 and 65 and over. A fall in unemployment was accompanied by a fall in inactivity. Total inactivity level decreased by 64,000 since the 3 months to March 2017 to 8.77 million. The inactivity rate for 16 to 64 year olds decreased by 0.2 percentage points since 3 months ago to a record low of 21.3%. Inactivity decreased for three age groups: 18 to 24, 25 to 34 and 35 to 49 and increased for three age groups: 16 to 17, 50 to 64 and 65 and over. The next section analyses some longer-term trends in economic inactivity.

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4. Characteristics of economically inactive people

Data from the Labour Force Survey back to 1995 also show that the overall inactivity rate remained fairly stable over the long period until 2011, even though there have been notable variations in the economic cycle. More recently, however, there has been a decline. The inactivity rate was 23.9% in April to June 1995 but was down to 21.3% in the same quarter in 2017 (Figure 4). Despite this relative stability over the long period, there have been some distinctive changes in the composition of the economically inactive group.

The total economic inactivity rate masks different patterns among men and women over time. For women, the rate shows a reduction from 32.7% classified as inactive in the 3 months to June 1995, to 26.3% compared with the same period in 2017, but the proportion of men who are inactive has risen from 15% in the 3 months to June 1995 to 16.3% compared with the same quarter in 2017 (Figure 4).

Over the past 20 years or so there has been an increase in the economic inactivity rates among young people. This reflects the increase in the proportion staying in full-time education and a corresponding decrease in the proportion among young people joining the labour force. These changes have had a substantial impact on the inactivity rate of people aged 16 to 17 and 18 to 24 but this trend is particularly strong among young people aged 16 to 17 (Figure 5). In contrast, the inactivity rate for people aged 50 to 64 and 65 and over has been steadily declining over the past 20 years.

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5. Main reasons for economic inactivity

The Labour Force Survey asks respondents for the main reasons they are inactive using certain criteria set out by Eurostat. The main groups are people looking after family and home, long-term sick or disabled, students, temporarily sick, retired and discouraged workers. Figure 6 shows that the largest group among the economically inactive in the 3 months to June 2000 was looking after the family and home (28.5%), followed by those classified as long-term sick or disabled (26.4%) and students (16.7%). The size of the largest group (looking after family and home) has been declining in the past 2 decades as more women enter the labour market. Since the 3 months to June 2000, compared with the same quarter in 2017, there were 0.35 million women moving from inactivity and joining the labour force.

The most profound change is noted in the student group where the rate rose by 9.6 percentage points, from 16.7% in the 3 months to June 2000 to 26.3% in the same period in 2017 (Figure 6). This trend indicates that in the future there will be more people joining the labour force from this group as they may be more likely to have better employment prospects after completing further education.

There have been some changes in the make-up of the inactive group among women. The single most important reason for inactivity among women is looking after family and home (Figure 7). However, there has been a sharp decline in the proportions looking after the family and home accompanied by increases in the proportions in the student group for women (Figure 9). The proportion of students among women has been increasing steadily from the 3 months to June 2008 to the same period in 2017 to reach a record high rate of 21.1% (Figure 7).

Among men, there has been a shift in the make-up of the inactive group over the past 22 years. Long- term sick or disabled men were the largest group within the inactive but since the 3 months to October 2009, for the first time, this group was overtaken by those classified as students (Figure 8).

Figure 9 shows that the composition in the inactive groups for men and women has changed over time. For men, there has been an increase in the proportion of those looking after family and home, and retired and for women there has been a decline in the proportion that are inactive due to looking after family or home, and retired. For both men and women, there has been an increase in the proportion who are students and a decline in the proportion who are temporarily sick, long-term sick (although this change is more pronounced for women) as well as discouraged workers.

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6. Economic inactivity and unemployment by region

Figures 10 and 11 show the inactivity rate and unemployment rate for countries and regions in the UK. There are a number of regional variations in economic inactivity and unemployment rates. Figures 10 and 11 indicate that higher rates of inactivity tend to exist in areas with above average unemployment rates. It should be noted that the denominators for the unemployment rate and the inactivity rate are slightly different.

The spread of inactivity rates between countries and regions in the 3 months to June 2017 in the UK was 8.7 percentage points, the South East having the lowest (at 18.2%) and Northern Ireland having the highest (at 26.9%).

Figure 10 shows that the only region in the UK that saw an increase in economic inactivity in the 3 months to June 2017 compared with the same quarter in 2000 was the East Midlands, whereas all other UK regions saw a decrease in inactivity in the same period. In the 3 months to June 2017, four UK regions had a below UK average inactivity rate. These regions were: the East of England, London, the South East and the South West, whereas in all other UK countries and regions the inactivity rate in the 3 months to June 2017 was above the UK average of 21.3%.

It should, however, be noted that looking at these patterns on a regional level may oversimplify the picture. There is evidence to suggest that differences within regions may well be much larger than the differences between regions. Further analysis would have to be carried out to establish whether the patterns identified at the regional level hold for smaller geographical areas.

As this article has identified, there are a number of distinct groups of people in inactivity. Further analysis is planned to look in more detail at longitudinal flows data to help understand the reasons for inactivity and also the dynamics of the different groups.

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7. Authors

Adama Lewis and Maja Savic.

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Contact details for this Article

Adama Lewis / Maja Savic
economic.advice@ons.gsi.gov.uk
Telephone: +44(0) 207 592 8672 / +44 (0)207 592 8698