Real wage growth and low unemployment are good for households, but inadequate labour supply is constraining growth

Responding to today’s ONS labour market figures, Jon Boys, Senior Labour Market Economist for the CIPD, the professional body for HR and people development, comments: 

“The steady state of the labour market is a reason to be cheerful in an uncertain world. Although wage growth has peaked, falling inflation means we are experiencing real growth, boosting people’s spending power. Unemployment remains low, meaning that most people who have access to the job market could secure a job.  

“In this general election year, these are positive signs for an incumbent government, but the headline figures disguise major challenges in the UK labour market. Increased sickness in the population has hit labour supply hard, with more employees than ever taking sick days or dropping out of the labour market due to long-term illness. Plans to lower legal immigration will also further restrict supply, impacting industries like health and social care in particular, which already suffer from skills shortages.   

“Every week a new report claims that automation and AI will be doing the heavy lifting soon, but there are limits to what a large language model can do for more frontline industries like health and social care or hospitality. The UK needs a plan to boost productivity in these sectors, also known as the everyday economy*, if we’re to really see the dial shift on business performance and productivity.”