Latest jobs data intensify focus on skills and productivity

Commentators on the latest ONS employment figures are advising employers to review recruitment and training as UK employment reaches record levels.

Ruth Holmes

25 January 2018

With figures showing employment in the UK reaching a 40-year high, Gerwyn Davies, senior labour market analyst for the CIPD, the professional body for HR and people development, offered a cautious welcome to the latest data. "The latest jobs figures paint a picture of cautious optimism in the UK labour market,” he said. “It’s positive to see such strong quarterly employment growth.”

Need now for new approach to recruitment?

Yet the tightening labour market is likely to bring with it the need for employers to change the way they recruit and retain their people, especially with Brexit, the government's commitment to capping net migration and figures already showing a fall in the number of EU workers in the UK.“The record high number of vacancies points to a tightening of the labour market,” said Mr Davies. “Employers will increasingly need to review their employment offering to continue to attract applicants.“The constraints in labour supply could therefore require a change in recruitment processes and greater investment in the training and upskilling of existing staff to ensure organisations have the skills they need to succeed. This will prove particularly pressing given the fall in net migration from the EU.”

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What does this mean for wages?

Employment might be at a record high, yet wages growth continues to struggle to keep pace with inflation as the UK’s productivity underperforms. Citing recent CIPD research, Mr Davies suggests employers are reluctant to increase wages. Commenting on wages trends underlying the ONS data, Richard Dorsett, Professor of Economic Evaluation at the University of Westminster, adds: “Some evidence of wage pressure is visible, with a year-on-year increase of 2.5% in nominal weekly earnings (including bonuses). However, inflation is such that in real terms this is a reduction of 0.2% over the year.

Structural issues see stubbornly long-term unemployment

Professor Dorsett also warns the UK labour market could hit capacity constraints as vacancies are at the highest level on record. “Towards the end of 2011, there were nearly six unemployed people for each vacancy; now there are fewer than two. This is lower than before the financial crisis, in fact, it is the lowest on record.”He also points to a further potential structural issue with the UK labour market with the number of people across different age groups who are experiencing long-term unemployment.“Some people still spend lengthy periods unemployed. The fact that roughly 20%, 30% and 40% of young, prime age and older [young (18-24); prime age (25-49); and older (50+)] unemployed respectively have been out of work for more than a year suggests a structural problem within the labour market.”

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