Mark Berrisford-Smith
The UK labour market: where have all the people gone?
The latest Economic commentary from Mark Berrisford-Smith, Head of Economics, Commercial Banking, HSBC UK.
Key points
The acute shortage of workers is a significant impediment to getting the annual rate of inflation back to its 2% target. As the economy flirts with recession, there is some evidence that the labour market has started to loosen, as reflected in falling numbers of vacancies. But it will take more than a year, and perhaps longer, for market forces alone to do the job.
The tightness of the labour market is partly the result of a modest increase in the proportion of people of working age who are ‘economically inactive’ – they are neither working nor unemployed. While much attention is focused on the rising tide of ill health, it’s more complicated than that, as many of the people who cite long-term sickness as the reason for being out of the labour market were not previously in work.
Early retirement and education have also affected economic inactivity, but it’s likely that an ageing population has been the biggest factor. This implies that a ‘quick fix’ will be hard to find, and that government policy and the approach of employers will need to focus on delaying the point at which people choose to retire.
To read the full breakdown, click here.