London Labour Market Update
Yiqiao Chen, February 2024
The ONS has restarted publication of Labour Force Survey (LFS)
estimates for London after a four-month break. The new figures, for the
quarter ending December 2023, are exceptionally volatile and should be
treated with caution.
The employment rate in London shows a 2
percentage point increase in a single quarter. The unemployment rate,
which we reported as 5.3% and rising in our January update for November
2023, has now been estimated as 4.5% in November and 3.8% in December –
which would be a record low.
While these improving figures
would be welcome news, the ONS cautions that they should be treated with
vigilance and used in conjunction with other indicators.
GLA
Economics’ macroeconomic monitoring suggests that indicators such as
business rates payments, consumer and business confidence and services
export growth suggest that London’s economy is indeed doing better than
the previously gloomy unemployment picture suggested — but not as
strongly as would be indicated by such a large drop in unemployment.
Changes to the
way that the ONS collects data for the LFS – made because sample
sizes were becoming unreliable – are one possible reason for this
month’s abnormally big swings in employment, inactivity and unemployment
rates. As the data collections improvements feed through into published
results, there is a possibility of large further revisions to our view
of the labour market.
Meanwhile, the new figures used mid-year
2022-based population estimates for the first time, in a move away
from pandemic-era reliance on older estimates based on administrative
data adjustments. They showed that London’s population was both smaller
and compositionally different to the previous estimates used to produce
the LFS.
However, since the ONS has not yet had time to produce
a complete back series for the new LFS estimates, there is now a
discontinuity between the quarters June-August and July-September 2022.
Between those dates, we note a fall in the 16+ population of 140,000
people, including 200,000 fewer men and 60,000 more women than
previously. These changes did not appear to significantly change
employment, unemployment or inactivity rates over that period.
Summary of key points
The most timely estimate of payrolled employees (subject to revision) shows an increase of around 8,750, or 0.2%, in London between December and January 2024 and an increase of 1.3% on the year.
The employment rate in London was estimated at 76.1% for the three months ending December 2023, up 3.1 percentage points (pp) on the previous quarter and up 2.0pp on the same period in the previous year. London’s employment rate was higher than the UK average (75.0%).
The unemployment rate was the same as the UK average. London’s unemployment rate was estimated at 3.8%, down 1.3pp on the quarter and down 0.9pp from a year earlier. The UK average was 3.8%.
London’s inactivity rate (the measure of those not looking and/or not available to work) was estimated at 20.8%. This was down 2.2pp on the previous quarter and down 1.3pp on the previous year, and was lower than the UK-wide estimate of 21.9%.
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 4.4 million payrolled employees living in London in January 2024, an increase of around 8,750, or 0.2%, on the previous month.
The latest London estimate represents an increase of 56,800, or 1.3%, on the previous year (January 2023) against a UK average increase of 1.4% (see charts).
Relative to pre-pandemic (February 2020) levels, the number of payrolled employees in London was up by 213,000, or 5.1%. This compares to an increase of 4.6% across the UK on average.
The figures for January 2024 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 January 2024:
Median monthly pay in London was £2,780, an increase of 5.1% on the year.
In the UK overall, median pay was £2,330, up by 6.4% 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 January 2023 to January 2024:
The region/country with the highest growth in median monthly salary was Wales at 7.4%.
The region/country with the lowest growth in median monthly salary was Northern Ireland at 4.6%.
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 December 2023, the latest month for which CPIH inflation data is available:
The year-on-year CPIH rate in the UK was 4.2%.
Nominal employee pay was up by 5.0% on the year in London, resulting in an increase of 0.8% 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 October 2023 to December 2023, we estimate the annualised growth rate of real pay in London to be 7.5%.
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 January 2024 to levels the previous year:
Health saw the highest percentage growth in payrolled employees at 6.1%, followed by Education (3.8%) and Arts & recreation (3.7%).
On the other hand, Information & communication saw the lowest percentage growth with a decrease of 3.6%, followed by Construction (down by 0.3%) and Retail (down by 0.3%).
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 December 2023 to levels the previous year:
The number of payrolled employees “Aged: 50-64” in London was up by 0.8%, while the number of employees “Aged: 18-24” was down by 0.8%.
For the UK overall, payrolled employee numbers in those two age groups increased by 0.6% and decreased by 0.4%, 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 October to December 2023:
The 16-64 employment rate in London was estimated at 76.1%; this represents an increase of 3.1 percentage points (pp) on the previous quarter and an increase of 2.0pp from a year earlier.
The overall UK employment rate was estimated at 75.0%, an increase of 0.2pp on the quarter and a decrease of 0.2pp on the year.
London and UK rates
Source: ONS Labour Force Survey.
Note: The margin of error is
±2.1% for London and ±0.7% for the UK. The LFS has been reweigted from
July to September 2022 onwards. September 2022 indicated by dotted line.
Regional comparison
Source: ONS Labour Force Survey.
Note: The margin of error ranges
from ±1.9% to ± 3.5% across regions.
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 October to December 2023:
The unemployment rate for London was estimated at 3.8%; this represents a decrease of 1.3pp on the previous quarter and a decrease of 0.9pp from a year earlier.
The UK unemployment rate was estimated at 3.8%, a decrease of 0.2pp from the previous quarter and unchanged on the year.
London and UK rates
Source: ONS Labour Force Survey.
Note: The margin of error is
±1.1% for London and ±0.4% for the UK. The LFS has been reweigted from
July to September 2022 onwards. September 2022 indicated by dotted line.
Regional comparison
Source: ONS Labour Force Survey.
Note: The margin of error ranges
from ±0.8% to ±1.8% across regions.
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 October to December 2023:
The rate of economic inactivity in London was estimated at 20.8%; this represents a decrease of 2.2pp on the previous quarter and a decrease of 1.3pp from a year earlier.
The UK rate of economic inactivity was 21.9%; this represents an increase of 0.0pp on the previous quarter and an increase of 0.2pp on the year.
London and UK rates
Source: ONS Labour Force Survey.
Note: The margin of error is not
published for London, the UK margin is ±0.4%. The LFS has been reweigted
from July to September 2022 onwards. September 2022 indicated by dotted
line.
Regional comparison
Source: ONS Labour Force Survey.
Note: The margin of error is not
published for regions.
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 January 2024 show that:
There were 308,000 people claiming unemployment-related benefits in London - equal to a claimant unemployment rate (as a proportion of residents aged 16 to 64) of 5.1%.
The number of claimants in London has increased by 27,200, or 9.7%, on the year, compared to an increase of 61,200, or 4.0%, 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. September 2022 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.
Summary of headline indicators
Headline estimates for Oct 2023-Dec 2023 | Number* (thousands) | Rate** (%) | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Latest Estimate | Change on Quarter | Change on Year | Latest Estimate | Change on Quarter | Change on Year | |||||
Employment | ||||||||||
London | 4,829 | 211 | t | 165 | t | 76.1 | 3.1 | t | 2.0 | t |
England | 28,213 | 77 | t | 144 | t | 75.4 | 0.2 | t | 0.0 | v |
UK | 33,174 | 72 | t | 107 | t | 75.0 | 0.2 | t | -0.2 | u |
Unemployment | ||||||||||
London | 191 | -55 | u | -41 | u | 3.8 | -1.3 | u | -0.9 | u |
England | 1,120 | -94 | u | -42 | u | 3.8 | -0.3 | u | -0.2 | u |
UK | 1,320 | -87 | u | -13 | u | 3.8 | -0.2 | u | 0.0 | v |
Economic Inactivity | ||||||||||
London | 1,269 | -132 | u | -75 | u | 20.8 | -2.2 | u | -1.3 | u |
England | 7,708 | 31 | t | 90 | t | 21.5 | 0.1 | t | 0.2 | t |
UK | 9,278 | 24 | t | 120 | t | 21.9 | 0.0 | v | 0.2 | t |
Source: ONS Labour Force Survey. | ||||||||||
Measuring the labour market
The ONS has published its latest labour market update covering Labour Force Survey (LFS) data for the three months ending December 2023 and real-time information (RTI) data up to January 2024. 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.