British workforce shrinks in midst of rising sickness

Britain’s unemployment rate fell to its lowest since 1974 as more people dropped out of the workforce, fanning upward pressure on wages.

The Government said 3.6 per cent of adults were out of work and looking for jobs in the three months through July, lower than the 3.8 per cent pace in the previous months.

The report also showed wages growing well above the prepandemic average and a record level of long-term sickness.

Together, the figures indicate less slack for the economy to grow without pushing prices past the Bank of England’s 2 per cent target.

That adds to pressure on the BOE to raise interest rates and on the Government to get people back into work.

“For a Government that wants to cut taxes to boost growth, today’s figures spell trouble,” said Tony Wilson, director at the Institute for Employment Studies.

“If we don’t do more to help more people into work, then any tax cuts will just lead to even higher inflation and higher interest rates for longer.”

Prime Minister Liz Truss is aiming to boost the pace of growth in the British economy to help pay for a multibillion-pound rescue package for households and businesses facing spiralling energy bills. The figures underscore the problems employers are having to fill jobs, which is forcing them to raise pay.

“The cost-of-doing-business crisis is intensifying,” said Jane Gratton, head of policy at the British Chambers of Commerce.

“With firms doing their best to keep afloat during a period of spiralling costs, they are also facing an extremely tight labour market, which is further impacting their ability to grow.”

Officials led by BOE governor Andrew Bailey have said they’re prepared to act “forcefully” to contain inflation, which pushed into double digits for the first time in 40 years.

Investors expect the central bank to lift the key lending rate at least half a percentage point next week from 1.75 per cent. There’s a chance that the BOE pushes through a three-quarter point rise.

“For businesses, low unemployment means labour shortages remain a very real concern,” said Kitty Ussher, chief economist at the Institute of Directors. “Having said that, today’s data also suggests some firms are pausing recruitment plans in the face of a weakening economy.”

The decline in the jobless rate was driven by a sharp increase in the people classed as economically inactive, or not seeking jobs. A total of 194,000 people left the workforce — the most since the start of the Covid pandemic. Part of that was due to rising levels of sickness. Young people who were working also moved back into education.

“Wider economic turmoil also looks to be affecting the jobs market,” said Gregory Thwaites, research director at the Resolution Foundation. “Instead of the costof-living crisis tempting people back into work, more people are exiting the jobs market altogether, primarily due to poor health reasons.”

The size of the United Kingdom’s workforce remains

250,000 smaller than it was before Covid-19 hit. A record 2.46 million were classed as long-term sick among those aged 16 to 64 years, a

350,000 increase since before the global pandemic.