London Labour Market Update
Ammar Ljubijankić Kutasi, August 2023
The UK labour market is weakening, according to the latest data, and
– although strong conclusions can’t be drawn from one month’s data – the
picture in London is worsening fast.
At the UK level, people
are moving from inactivity into unemployment, expanding the supply of
labour, while a fall in the employment rate completes the picture of a
labour market becoming less tight. Uncertainty in the data makes the
outlook less clear at the London level but this month the Labour Force
Survey data showed cause for concern. The employment rate fell, the
inactivity rate rose and both the unemployment rate and claimant count
rose.
However, real employee wages increased year-on-year for
the first time since March 2022, a welcome sign that cost-of-living
pressures are not increasing. Traditional low-wage industries such as
Retail, Arts & recreation and Transport & storage and
Hospitality all saw strong wage growth on the year, though Public admin
had the highest growth rate due to a single-month jump in July.
Summary of key points
The most timely estimate of payrolled employees (subject to revision) shows an increase of around 14,400, or 0.3%, in London between June and July 2023 and an increase of 2.4% on the year.
The employment rate in London was estimated at 74.3% for the three months ending June 2023, down 1.1 percentage points (pp) on the previous quarter and down 0.7pp on the same period in the previous year. London’s employment rate was lower than the UK average (75.7%).
The unemployment rate was still higher than the UK average. London’s unemployment rate was estimated at 5.1%, up 0.4pp on the quarter and up 0.5pp from a year earlier. The UK average was 4.2%.
London’s inactivity rate (the measure of those not looking and/or not available to work) was estimated at 21.7%. This was up 0.8pp on the previous quarter and up 0.4pp on the previous year, and was higher than the UK-wide estimate of 20.9%.
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 4.3 million payrolled employees living in London in July 2023, an increase of around 14,400, or 0.3%, on the previous month.
The latest London estimate represents an increase of 101,000, or 2.4%, on the previous year (July 2022) against a UK average increase of 1.9% (see charts).
Relative to pre-pandemic (February 2020) levels, the number of payrolled employees in London was up by 184,000, or 4.4%. This compares to an increase of 4.2% across the UK on average.
The figures for July 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 July 2023:
Median monthly pay in London was £2,730, an increase of 7.0% on the year.
In the UK overall, median pay was £2,270, up by 7.8% 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 July 2022 to July 2023:
The region/country with the highest growth in median monthly salary was Wales at 10.2%.
The region/country with the lowest growth in median monthly salary was London at 7.0%.
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 June 2023, the latest month for which CPIH inflation data is available:
The year-on-year CPIH rate in the UK was 7.3%.
Nominal employee pay was up by 7.8% on the year in London, resulting in an increase of 0.4% 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
Comparing July 2023 to levels the previous year:
Health saw the highest percentage growth in payrolled employees at 5.8%, followed by Arts & recreation (5.8%) and Hospitality (5.2%).
On the other hand, Construction saw the lowest percentage growth with a decrease of 0.4%, followed by Retail (down by 0.3%) and Information & communication (unchanged).
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 2023 to levels the previous year:
The number of payrolled employees “Aged: 50-64” in London was up by 1.7%, while the number of employees “Aged: 35-49” was up by 0.6%.
For the UK overall, payrolled employee numbers in those two age groups increased by 1.5% and increased by 1.6%, 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 April to June 2023:
The 16-64 employment rate in London was estimated at 74.3%; this represents a decrease of 1.1 percentage points (pp) on the previous quarter and a decrease of 0.7pp from a year earlier.
The overall UK employment rate was estimated at 75.7%, a decrease of 0.1pp on the 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
±2.1% for London and ±0.6% for the UK. March 2020 indicated by dotted
line.
Regional comparison
Source: ONS Labour Force Survey.
Note: The margin of error ranges
from ±1.5% to ± 2.9% 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 April to June 2023:
The unemployment rate for London was estimated at 5.1%; this represents an increase of 0.4pp on the previous quarter and an increase of 0.5pp from a year earlier.
The UK unemployment rate was estimated at 4.2%, an increase of 0.3pp from the previous quarter and an increase of 0.4pp on the year.
London and UK rates
Source: ONS Labour Force Survey.
Note: The margin of error is
±1.2% for London and ±0.3% for the UK. March 2020 indicated by dotted
line.
Regional comparison
Source: ONS Labour Force Survey.
Note: The margin of error ranges
from ±0.8% to ±1.7% 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 April to June 2023:
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 0.4pp from a year earlier.
The UK rate of economic inactivity was 20.9%; this represents a decrease of 0.1pp on the previous quarter and a decrease of 0.6pp 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 ±0.3%. March 2020 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 July 2023 show that:
There were 302,000 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 19,600, or 6.9%, on the year, compared to an increase of 39,300, or 2.6%, 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.
Summary of headline indicators
Headline estimates for Apr 2023-Jun 2023 | Number* (thousands) | Rate** (%) | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Latest Estimate | Change on Quarter | Change on Year | Latest Estimate | Change on Quarter | Change on Year | |||||
Employment | ||||||||||
London | 4,747 | -126 | u | -54 | u | 74.3 | -1.1 | u | -0.7 | u |
England | 27,960 | -52 | u | 197 | t | 76.2 | -0.1 | u | 0.3 | t |
UK | 32,929 | -66 | u | 137 | t | 75.7 | -0.1 | u | 0.2 | t |
Unemployment | ||||||||||
London | 256 | 15 | t | 26 | t | 5.1 | 0.4 | t | 0.5 | t |
England | 1,231 | 79 | t | 109 | t | 4.2 | 0.3 | t | 0.3 | t |
UK | 1,439 | 109 | t | 145 | t | 4.2 | 0.3 | t | 0.4 | t |
Economic Inactivity | ||||||||||
London | 1,337 | 52 | t | 27 | t | 21.7 | 0.8 | t | 0.4 | t |
England | 7,151 | -32 | u | -187 | u | 20.4 | -0.1 | u | -0.6 | u |
UK | 8,693 | -38 | u | -198 | u | 20.9 | -0.1 | u | -0.6 | u |
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 June 2023 and real-time information (RTI) data up to July 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.