Unemployment rises but fewer claiming benefits in the West Midlands

The UK's unemployment rate dropped to its lowest for almost half a decade as more Britons left the labour market completely, according to official figures.

The Office for National Statistics (ONS) said the unemployment rate fell to 3.5 per cent over the three months to August – the lowest since February 1974.

Economists had predicted that the unemployment rate would stay steady at 3.6 per cent, the rate it hit during the previous quarter.

It came after a joint-record rise in the number of people considered "economically inactive" – not in work or searching for work – due to long-term sickness.

Economic activity increased by 0.6 percentage points to 21.7 per cent, driven by people aged between 50 and 64. This meant that both the rate of unemployment and employment declined over the period.

The employment rate decreased by 0.3 percentage points to 75.5 per cent for the quarter. Meanwhile, the number of UK workers on payrolls rose by 69,000 between August and September to 29.7 million, the ONS said.

In the West Midlands the unemployment figure was 139,000 (4.7 per cent of the working population) in the three months to August – up 3,000 on the three months to July. The region's employment figure fell from 2.85 million to 2.83 million.

The West Midlands saw a fall in the numbers claiming unemployment benefits, including Universal Credit last month. The total of 177,405 (4.8 per cent) was down 45 on the previous month.

In the Black Country Sandwell had 30 more claimants at 13,440 (6.6 per cent) with Wolverhampton up 55 to 12,115 (7.4 per cent).

But Walsall had 165 less claimants at 9,610 (5.5 per cent) and Dudley had 85 fewer at 9,315 (4.8 per cent).

Staffordshire had an increase of 105 to 14,560 (2.7 per cent). Lichfield had a fall of 75 to 1,515 (2.4 per cent) with South Staffordshire up by 50 to 1,770 (2.6 per cent), Cannock Chase up five to 2,015 (3.2 per cent), and Stafford up 30 to 2,035 (2.4 per cent).

Wyre Forest, including Kidderminster, remained the same at 1,930 (3.3 per cent).

ONS head of labour market and household statistics David Freeman said: "The unemployment rate continues to fall and is now at its lowest for almost 50 years.

"However, the number of people neither working nor looking for work continues to rise, with those who say this is because they're long-term sick reaching a record level.

"While the number of job vacancies remains high after its long period of rapid growth, it has now dropped back a little, with a number of employers telling us they've reduced recruitment due to a variety of economic pressures.

"However, because unemployment is also down, there continues to be more vacancies than unemployed people."

In July to September 2022, the estimated number of vacancies fell by 46,000 on the quarter to 1,246,000, the ONS said, amid a slowdown in company investment.

The new data also showed another slight improvement in pay but it continues to lag far behind inflation.

Average pay, excluding bonuses, grew by 5.4 per cent over the three months from June to August.

However, it comes after Consumer Price Index (CPI) inflation struck 9.9 per cent in August, highlighting a still significant gap between Britons' pay packets and the cost of goods and services.

In response, Chancellor Kwasi Kwarteng said: "Countries around the world are facing economic challenges but today's statistics remind us that the fundamentals of the UK economy remain resilient, with unemployment at its lowest point for almost 50 years.

"Our ambitious growth plan will drive sustainable long-term growth, meaning higher wages and better living standards for everyone, and we are cutting taxes so people can keep more of what they earn."

Kitty Ussher, chief economist at the Institute of Directors, said: "The labour market remains extraordinarily tight with, for the first time ever, more vacancies in the economy than the number of people looking for work, and no let-up in hiring in September.

"Although the level of vacancies now looks like it has peaked, it remains significantly higher than before the pandemic, at 1.2 million.

"Combined with such a low rate of unemployment and pay rises edging upwards, we see no reason why the Bank of England would pause its upward march of interest rate rises when it meets in early November."

DWP Minister of State, Victoria Prentis, said: “Today’s figures show the strength of our labour market; our unemployment rate remains at a near record low and there are a high number of people on payrolls. To support economic growth it is vital we encourage workers into the labour market, making the most of the skills and experience this country holds whilst tackling the barriers jobseekers face.

“We recently made changes to Universal Credit and our older workers’ offer so even more claimants receive intensive support from a dedicated Work Coach, to help them not only get into work, but also to seize opportunities and increase their job prospects and pay.

“We are committed to looking after the most vulnerable which is why we are delivering at least £1,200 of support to families this winter while also saving households an average of £1,000 a year through our Energy Price Guarantee.”

British Chambers of Commerce head of research, David Bharier, said the UK was facing the tightest labour market in years.

"Our own research shows that labour shortages are holding back the ability of many businesses to service existing customers and grow.

“Despite a further decrease in the number of job vacancies to just under 1.25m, the overall level remains very high. Businesses are currently facing multiple external shocks, from global supply chain disruption, rampant inflation, and rising interest rates. Labour shortages are yet another issue weighing down on business confidence.

“While the unemployment rate of 3.5% stands at the lowest level since 1974, the increasing economic inactivity rate, now standing at 21.7%, should be a cause for concern, with long-term sickness cited by the ONS as a key driver of this. Average weekly earnings also continue to be outstripped by inflation for workers overall.

“If Government is serious about growth, it needs to get serious about jobs. There are key reforms it should adopt to help ease tightness in the labour market. These include supporting greater business investment in workforce training, adopting flexible working practices, expanding the use of apprenticeships, and a comprehensive reform of the Shortage Occupation List to allow sectors facing urgent demand for skills to get what they need.”

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