London Labour Market Update
September 2022
Contact: Ammar Ljubijankic Kutasi
Unemployment in the UK fell to a record low (3.6%) and in London fell to its joint-lowest level (4.2%) since the start of the series in 1992, but other headline labour market indicators present mixed messages.
The inactivity rate rose sharply and the employment rate fell in both London and the UK, with national data suggesting that long-term illness is forcing many workers out of employment.
The number of payrolled employees resident in London continued to rise month-on-month while the number of workforce jobs in the capital has now surpassed the pre-pandemic peak, despite a fall in self-employed jobs.
Median nominal pay in London stagnated month-on-month and even though the year-on-year increase is still above 5%, growth is not keeping up with inflation.
Summary of key points
The most timely estimate of payrolled employees shows an increase of around 9,460, or 0.2%, in London between July and August 2022 and was 1.8% above pre-pandemic (February 2020) levels.
The employment rate in London was estimated at 74.8% for the three months ending July 2022, down 0.3 percentage points (pp) on the previous quarter and down 0.1pp on the same period in the previous year. London’s employment rate was lower than the UK average (75.4%).
The unemployment rate continued to fall from its pandemic peak but was still higher than the UK average. London’s unemployment rate was estimated at 4.2%, down 0.6pp on the quarter and down 1.8pp from a year earlier. The UK average was 3.6%.
London’s inactivity rate (the measure of those not looking and/or not available to work) was estimated at 21.7%. This was up 1.4pp on the previous year and up 0.8pp on the previous quarter and is now the same as the UK-wide estimate of 21.7%.
The total number of workforce jobs increased by 89,200, or 1.5%, between the first quarter of 2022 and second quarter of 2022, and was 47,000, or 0.8%, above pre-pandemic (December 2019) levels. This is the first quarter in which workforce jobs exceeded the pre-pandemic peak.
Measuring the labour market
The ONS has published its latest labour market update covering Labour Force Survey (LFS) data for the three months ending July 2022 and real-time information (RTI) data up to August 2022. This bulletin presents the latest headline labour market estimates for London.
Please note:
Many of the statistics presented here are estimates based on surveys, and as such have a margin of error – known as sampling variability.
They also cover different reference periods or count dates, and have therefore been impacted differently by the spread of COVID-19.
More information and previous GLA Economics analyses can be found on our labour market analysis page.
More information on the data used and a glossary of terms can be found on the ONS website.
Payrolled employees
The count of payrolled employees from HMRC’s Pay As You Earn (PAYE) RTI dataset offers a timely measure of labour market trends:
Early estimates indicate that there were around 4.2 million payrolled employees living in London in August 2022, an increase of around 9,460, or 0.2%, on the previous month.
The latest London estimate represents an increase of 174,000, or 4.3%, on the previous year (August 2021) against a UK average increase of 2.8% (see charts).
Relative to pre-pandemic (February 2020) levels, the number of payrolled employees in London was up by 75,200, or 1.8%. This compares to an increase of 2.5% across the UK on average.
Change on previous year
Source: HM Revenue and Customs – Pay As You Earn Real Time Information.
Note: Estimates are based on where employees live. March 2020 indicated by dotted line.
Change since February 2020, regions
Source: HM Revenue and Customs – Pay As You Earn Real Time Information.
Note: Estimates are based on where employees live.
Change on previous year, regions
Source: HM Revenue and Customs – Pay As You Earn Real Time Information.
Note: Estimates are based on where employees live.
Employee pay and inflation
The RTI dataset also provides information on the nominal monthly pay of payrolled employees living in London. This can be adjusted for inflation to estimate real pay over time.
CPIH (consumer price inflation including owner-occupiers’ housing costs) is a national measure and does not account for region-specific price changes.
Median monthly pay
The median pay is an average which measures the middle point in the range of recorded monthly employee salaries.
In August 2022:
Median monthly pay in London was £2,550, an increase of 13.4% since February 2020 and an increase of 5.5% on the year.
In the UK overall, median pay was £2,110, up by 13.7% since February 2020 and up 6.5% on the year.
Source: HM Revenue and Customs – Pay As You Earn Real Time Information.
Note: Estimates are based on where employees live. March 2020 indicated by dotted line.
Annual real pay growth
Growth in real wages can be estimated by adjusting nominal pay for the rate of inflation, here CPIH.
In July 2022, the latest month for which CPIH inflation data is available:
The year-on-year CPIH rate in the UK was 8.8%.
Nominal employee pay was up by 5.7% on the year in London, resulting in a decrease of 2.9% in real pay on the year.
Source: HM Revenue and Customs – Pay As You Earn Real Time Information, ONS.
Note: March 2020 indicated by dotted line. Inflation measure does not account for region-specific price changes. Sign of inflation rates has been reversed (higher inflation rates are associated with lower real pay growth).
Additional payrolled employee statistics
The tabs below are each updated once per quarter, as new data is released by the ONS/HMRC.
Change by industry
Some industries have yet to recover from the pandemic. Comparing July 2022 to pre-pandemic (February 2020) levels:
Public admin & defence saw the highest percentage growth in payrolled employees at 13.8%, followed by Health (7.2%) and Administration (6.2%).
On the other hand, Transport & storage saw the lowest percentage growth with a decrease of 5.7%, followed by Hospitality (down by 4.8%) and Other services (down by 3.6%).
Source: HM Revenue and Customs – Pay As You Earn Real Time Information.
Note: Estimates are based on where employees live. Excludes sectors with fewer than 25,000 payrolled employees in London.
Change by age group
Recent changes in the number of payrolled employees vary by age group. Comparing June 2022 to pre-pandemic (February 2020) levels:
The number of payrolled employees “Aged: 50-64” in London was up by 3.9%, while the number of employees “Aged: 25-34” was down by 1.2%.
For the UK overall, the number of payrolled employees in those two age groups saw an increase of 3.4% and an increase of 0.6%, respectively.
Source: HM Revenue and Customs – Pay As You Earn Real Time Information.
Note: Estimates are based on where employees live.
Employment rate
Employment measures the number of people aged 16 and over in paid work and those who had a job that they were temporarily away from. The employment rate is the proportion of people aged between 16 and 64 years who are in employment.
For May to July 2022:
The 16-64 employment rate in London was estimated at 74.8%; this represents a decrease of 0.3 percentage points (pp) on the previous quarter and a decrease of 0.1pp from a year earlier.
The overall UK employment rate was estimated at 75.4%, a decrease of 0.2pp on the quarter and an increase of 0.3pp on the year.
Source: ONS Labour Force Survey.
Note: The margin of error is +/- 1.4% for London and +/- 0.4% for the UK. March 2020 indicated by dotted line.
Unemployment rate
Unemployment measures people without a job who have been actively seeking work within the last four weeks and are available to start work within the next two weeks. The unemployment rate is the proportion of the economically active population who are unemployed.
For May to July 2022:
The unemployment rate for London was estimated at 4.2%; this represents a decrease of 0.6pp on the previous quarter and a decrease of 1.8pp from a year earlier.
The UK unemployment rate was estimated at 3.6%, a decrease of 0.2pp from the previous quarter and a decrease of 1.0pp on the year.
Source: ONS Labour Force Survey.
Note: The margin of error is +/- 0.8% for London and +/- 0.2% for the UK. March 2020 indicated by dotted line.
Economic inactivity rate
The economic inactivity rate is the proportion of 16 to 64 year olds not in work and either not looking for or unable to work. This group includes some students, people who are looking after family/home, and people who are too ill to work (most of whom are long-term sick).
For May to July 2022:
The rate of economic inactivity in London was estimated at 21.7%; this represents an increase of 0.8pp on the previous quarter and an increase of 1.4pp from a year earlier.
The UK rate of economic inactivity was 21.7%; this represents an increase of 0.4pp on the previous quarter and an increase of 0.5pp on the year.
Source: ONS Labour Force Survey.
Note: The margin of error is not published for London, the UK margin is +/- 0.4%. March 2020 indicated by dotted line.
Claimant count
The claimant count is a measure of the number of people claiming benefits principally for the reason of being unemployed. It includes people claiming Jobseeker’s Allowance and those claiming Universal Credit who are required to seek work.
The latest data for August 2022 show that:
There were 285,000 people claiming unemployment-related benefits in London - equal to a claimant unemployment rate (as a proportion of residents aged 16 to 64) of 4.7%.
The number of claimants in London has decreased by 126,000, or 30.6%, on the year, compared to a decrease of 606,000, or 28.3%, in the UK overall.
Rate of residents aged 16-64
Source: ONS Claimant Count by sex and age (NSA).
Note: may include some employed claimants on low hours or earnings. March 2020 indicated by dotted line.
Year-on-year percentage change
Source: ONS Claimant Count by sex and age (NSA).
Note: may include some employed claimants on low hours or earnings.
Workforce jobs
Number of workforce jobs
The Workforce Jobs series provides quarterly estimates of the number of jobs in the UK and is the ONS’ preferred source of jobs broken down by region of workplace and industry.
The latest data for June 2022 show that:
The total number of workforce jobs in London was estimated at 6.1 million, an increase of approximately 1.5% from March 2022 against a UK average of 0.8%.
The latest estimate represents an increase of approximately 47,000, or 0.8%, from December 2019 levels (the pre-pandemic peak in London) compared with an increase of 0.5% across the UK on average.
Total jobs includes both employee and self-employment jobs alongside other types of employment; since December 2019, the latest employee jobs estimate has increased by 127,000 (2.4%) while the self-employment jobs estimate has decreased by 79,000 (9.6%).
Source: ONS Workforce Jobs.
Note: The margin of error for all jobs is +/- 0.9% for London and +/- 0.3% for the UK. March 2020 indicated by dotted line.
Workforce jobs by sector
Between December 2019 and June 2022*:
Hospitality recorded the largest percentage decrease in jobs in London (-61,600 or -13.4%); this was followed by Transport & storage (-30,200 or -9.5%) and Administration (-41,600 or -6.9%).
The following industry groups shown in the chart saw the largest positive percentage change in jobs in London:
- Professional services (94,700 or 11.6%)
- Public admin & defence (17,500 or 7.0%)
- Education (29,600 or 7.0%)
Source: ONS Workforce Jobs.
Note: The margin of error for all jobs is +/- 0.9% for London and +/- 0.3% for the UK.
Summary of headline indicators
Headline estimates for May 2022-Jul 2022 | Number* (thousands) | Rate** (%) | ||||||||
Latest Estimate | Change on Quarter | Change on Year | Latest Estimate | Change on Quarter | Change on Year | |||||
Employment | ||||||||||
London | 4,796 | -14 | u | 25 | t | 74.8 | -0.3 | u | -0.1 | u |
UK | 32,746 | 40 | t | 337 | t | 75.4 | -0.2 | u | 0.3 | t |
Unemployment | ||||||||||
London | 212 | -33 | u | -94 | u | 4.2 | -0.6 | u | -1.8 | u |
UK | 1,224 | -76 | u | -332 | u | 3.6 | -0.2 | u | -1.0 | u |
Economic Inactivity | ||||||||||
London | 1,335 | 52 | t | 91 | t | 21.7 | 0.8 | t | 1.4 | t |
UK | 9,011 | 194 | t | 246 | t | 21.7 | 0.4 | t | 0.5 | t |
Source: ONS Labour Force Survey. | ||||||||||