London Labour Market Update
Yiqiao Chen, December 2023
The London labour market continued to weaken in November with
disappointing numbers for pay growth and unemployment.
Meanwhile, hidden in the latest quarterly release of workforce jobs
numbers are revisions that show London’s hospitality sector recovered
much faster and stronger from the pandemic than previously thought. Jobs
in the sector rebounded to their December 2019 level a full year earlier
than the June 2023 date previously published. By September this year
there were 111,000 more jobs (24%) than pre-pandemic (458,000 jobs).
Overall, workforce jobs continue to rise, with London adding
38,000 jobs from June’s revised number (or an addition of 93,000 jobs on
the pre-revision number).
Pay growth before inflation,
meanwhile, fell to 3.7% year-on-year and 1.3% at an annualised rate in
the latest quarter. The adjusted unemployment rate in London increased
to 5.3% (up 0.1 pp on the previous quarter) while the Claimant Count in
London held steady at 5.0%.
The ONS has again released
experimental “adjusted” estimates of the headline labour market
statistics because of the uncertainty
surrounding the official Labour Force Survey.
Summary of key points
The most timely estimate of payrolled employees (subject to revision) shows a decrease of around 5,350, in London between October and November 2023 and an increase of 1.1% on the year.
Labour Force Survey (LFS) statistics are currently not considered reliable enough for publication. The ONS has instead released experimental “adjusted” estimates of the employment, unemployment and inactivity rates for the UK and the regions.
The adjusted employment rate in London was estimated at 74.2% for the three months ending October 2023. London’s employment rate was estimated to be lower than the UK average (75.7%).
The adjusted unemployment rate in London was estimated at 5.3%. The UK average was 4.2%.
London’s adjusted inactivity rate (the measure of those not looking and/or not available to work) was estimated at 21.6%. This was higher than the UK-wide estimate of 20.9%.
The total number of workforce jobs increased by 38,200, or 0.6%, between the second and third quarter of 2023, and was 244,000, or 3.8%, above levels the previous year.
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 4.3 million payrolled employees living in London in November 2023, a decrease of around 5,350, or 0.1%, on the previous month.
The latest London estimate represents an increase of 46,900, or 1.1%, on the previous year (November 2022) against a UK average increase of 1.1% (see charts).
Relative to pre-pandemic (February 2020) levels, the number of payrolled employees in London was up by 179,000, or 4.3%. This compares to an increase of 4.1% across the UK on average.
The figures for November 2023 in the RTI dataset are provided to give an indication of the likely level of employees as well as median pay in the latest period. They are of lower quality and may be subject to significant revision in future releases.
Number of payrolled employees
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 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 November 2023:
Median monthly pay in London was £2,720, an increase of 3.7% on the year.
In the UK overall, median pay was £2,310, up by 5.3% 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.
Pay by region
The change in median nominal salary on the year varies between the regions and countries of the UK.
From November 2022 to November 2023:
The region/country with the highest growth in median monthly salary was South West at 6.3%.
The region/country with the lowest growth in median monthly salary was Northern Ireland at 2.3%.
Source: HM Revenue and Customs – Pay As You Earn Real Time
Information.
Note: Estimates are based on where employees live.
Annual real pay growth
Growth in real wages can be estimated by adjusting nominal pay for the rate of inflation, here CPIH.
In October 2023, the latest month for which CPIH inflation data is available:
The year-on-year CPIH rate in the UK was 4.7%.
Nominal employee pay was up by 4.9% on the year in London, resulting in an increase of 0.2% 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). Inflation data is released after pay data and is
not available for the most recent month.
Annualised growth rates
Annual growth rates are a backwards-looking measure that indicate the cumulative impact of changes over the previous year. This is an important measure that shows how much wages, or prices have changed in total over the last year.
However, it is also important to understand how fast things are changing at the present time. To do this we show annualised growth rates that measure how fast prices and pay have changed over the last three months.
Using the three-month period August 2023 to October 2023, we estimate the annualised growth rate of real pay in London to be -4.5%.
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.
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
Comparing October 2023 to levels the previous year:
Health saw the highest percentage growth in payrolled employees at 6.0%, followed by Arts & recreation (4.6%) and Finance & insurance (3.7%).
On the other hand, Information & communication saw the lowest percentage growth with a decrease of 2.8%, followed by Retail (down by 0.9%) and Construction (down by 0.6%).
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 September 2023 to levels the previous year:
The number of payrolled employees “Aged: 50-64” in London was up by 1.3%, while the number of employees “Aged: 18-24” was up by 0.4%.
For the UK overall, payrolled employee numbers in those two age groups increased by 0.8% and increased by 0.1%, 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 August 2023 to October 2023:
London’s adjusted employment rate was estimated to be 74.2%. This rate was unchanged on the previous three-month period, though the latter was estimated using standard Labour Force Survey data.
The employment rate for the UK overall was estimated at 75.7%.
London and UK rates
Source: ONS Labour Force Survey.
Note: Margins of error are not
available. March 2020 indicated by dotted line. Adjusted estimates shown
in orange.
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 August 2023 to October 2023:
London’s adjusted unemployment rate was estimated at 5.3%. This was up 0.1pp on the previous three-month period.
The unemployment rate for the UK was estimated at 4.2%.
London and UK rates
Source: ONS Labour Force Survey.
Note: Margins of error are not
available. March 2020 indicated by dotted line. Adjusted estimates shown
in orange.
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 August 2023 to October 2023:
The adjusted rate of economic inactivity in London was estimated at 21.6%. This was down 0.1pp on the previous three-month period.
The UK economic inactivity rate was estimated at 20.9%.
London and UK rates
Source: ONS Labour Force Survey.
Note: Margins of error are not
available. March 2020 indicated by dotted line. Adjusted estimates shown
in orange.
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 November 2023 show that:
There were 304,000 people claiming unemployment-related benefits in London - equal to a claimant unemployment rate (as a proportion of residents aged 16 to 64) of 5.0%.
The number of claimants in London has increased by 20,500, or 7.2%, on the year, compared to an increase of 42,500, or 2.8%, in the UK overall.
Rate of residents aged 16-64
Source: ONS Claimant Count by sex and age (seasonally
adjusted).
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 (not seasonally
adjusted).
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 September 2023 show that:
The total number of workforce jobs in London was estimated at 6.6 million, an increase of approximately 0.6% from June 2023 against a UK average of 0.6%.
The latest estimate represents an increase of approximately 244,000, or 3.8%, from levels the year before, compared with an increase of 2.2% 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 687,000 (13.1%) while the self-employment jobs estimate has decreased by 191,000 (23.1%).
Source: ONS Workforce Jobs.
Note: The margin of error for all
jobs is +/- 1.7% for London and +/- 0.6% for the UK. March 2020
indicated by dotted line.
Sector changes on year
Between September 2022 and September 2023*:
Manufacturing recorded the largest percentage decrease in jobs in London (-18,200 or -13.5%); this was followed by Arts & recreation (-22,800 or -11.2%) and Construction (-12,200 or -4.2%).
The following industry groups shown in the chart saw the largest positive percentage change in jobs in London:
- Hospitality (75,400 or 15.3%)
- Health (61,700 or 9.7%)
- Finance & insurance (26,500 or 6.9%)
Source: ONS Workforce Jobs.
Note: The margin of error for all
jobs is +/- 1.7% for London and +/- 0.6% for the UK.
Sector changes on pre-pandemic
Between December 2019 and September 2023*:
Manufacturing recorded the largest percentage decrease in jobs in London (-20,200 or -14.7%); this was followed by Construction (-37,800 or -11.9%) and Arts & recreation (-21,000 or -10.4%).
The following industry groups shown in the chart saw the largest positive percentage change in jobs in London:
- Hospitality (111,000 or 24.2%)
- Professional services (154,000 or 18.9%)
- Health (95,600 or 15.9%)
Source: ONS Workforce Jobs.
Note: The margin of error for all
jobs is +/- 1.7% for London and +/- 0.6% for the UK.
Measuring the labour market
The ONS has published its latest labour market update covering Labour Force Survey (LFS) data for the three months ending October 2023 and real-time information (RTI) data up to November 2023. 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.
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.