London Labour Market Update
Guillaume Paugam, July 2024
Labour force participation ticked up in London, with employment and
unemployment rates both increasing on the year and above the UK average
according to the latest ONS data from the Labour Force Survey. That
meant that the economic inactivity rate is down on the year and below
the UK average. Resident payrolled employment growth, from HMRC
real-time indicators, was particularly strong in Outer London boroughs.
Higher unemployment in London than across the country is in
line with the rise in the number and rate of adults claiming out-of-work
benefits in London, with London’s claimant rate higher than the UK
average.
Pay growth is slowing down in London. In the capital,
the growth rate of median pay was weak compared to most other regions of
the UK. Real pay growth is now almost zero on the year, after increasing
for a few months. That is in contrast to national data reported by ONS
today, from a different salaries survey, which showed continued strong
real pay growth.
Note that the latest labour market data for
London remains volatile and ONS warns that estimates of changes should
be treated with caution. We adopt ONS’ prudent language when reporting
quarterly changes of the employment rate, unemployment rate and
inactivity rate. The focus should be on the general movements rather
than the exact figures. As data collection improvements feed into
published results, there is a possibility of further revisions. This
report uses several data sources and indicators, which need to be taken
together to get a reliable picture of London’s labour market.
Summary of key points
The most timely estimate of payrolled employees (subject to revision) shows a decrease of around 2,120, or a very small (-0.05%) decrease in percentage terms, in London between May and June 2024 and an increase of 0.5% on the year.
The employment rate in London was estimated at 74.8% for the three months ending May 2024, an increase of 1.1pp on the same period in the previous year, but below the previous quarter. London’s employment rate was slightly higher than the UK average (74.4%).
London’s unemployment rate was estimated at 5.1%, up on the quarter and an increase of 0.1pp from a year earlier. The UK average was 4.4%.
London’s inactivity rate (the measure of those not looking and/or not available to work) was estimated at 21.0%. This was a decrease of 1.2pp on the previous year, and was also down on the quarter. It is much lower than the UK-wide estimate of 22.1%.
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 June 2024, a decrease of around 2,120, or near stability in terms of percentage change (-0.05%).
The latest London estimate represents an increase of 20,200 (0.5%), on the previous year (June 2023) compared to a UK-wide increase of 0.8%.
Over the year, the rise in resident payrolled employment in London has been strongest in Outer London (+1.3% for East and North-East Outer London, +1% for South Outer London, +0.8% in West and North-West Outer London). It fell in West Inner London (-1.2%) and was stable in East Inner London.
Relative to pre-pandemic (February 2020) levels, the number of payrolled employees in London was up by 232,000, or 5.6%. This compares to an increase of 4.8% across the UK on average.
The figures for June 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, within London
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 June 2024:
Median monthly pay in London was £2,810, an increase of 3.0% on the year.
In the UK overall, median pay was £2,380, up by 3.6% 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 June 2023 to June 2024:
South East was the region/country with the lowest growth in median monthly salary at 2.7%.
The region/country with the highest growth in median monthly salary was Northern Ireland at 11.2%.
London’s median pay growth on the month is amongst the slowest in the UK, although there is not much difference between London’s growth rate and other regions of England (minimum growth rate of 2.7% in South-East and maximum of 3.9% in North-West). The difference is much more pronounced between English regions and the other nations of the UK.
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, giving a better idea of how much wages progress in relation to the cost of living.
In June 2024, the latest month for which CPIH inflation data is available:
The year-on-year CPIH rate in the UK was 2.8%.
Nominal employee pay was up by 3.0% on the year in London, resulting in an increase of 0.2% in real pay on the year.
This modest real pay increase on the year contrasts with rising real pay observed in London between October 2023 and May 2024.
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 April 2024 to June 2024, we estimate the annualised growth rate of real pay in London to be -1.8%.
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 age group
Recent changes in the number of payrolled employees vary by age group. Comparing June 2024 to levels the previous year:
The number of employees “Aged: 18-24” was down by 2.7%. Otherwise, the number of payrolled employees rose across all the other age groups.
The 65+ age group experienced by far the biggest increase, but it only represents 3% of total payrolled employment in London. The small headcount in that category means that it is more likely to exhibit bigger percentage variations than the other groups for a given headcount change.
Changes by age groups in London are similar to what is happening in the UK as a whole.
Source: HM Revenue and Customs – Pay As You Earn Real Time
Information.
Note: Estimates are based on where employees live.
Change by industry
Comparing April 2024 to levels the previous year:
Health saw the highest percentage growth in payrolled employees at 5.3%, followed by Public admin & defence (3.2%) and Education (2.9%).
On the other hand, Information & communication saw its number of payrolled employee jobs fall, with a decrease of 4.3%, followed by Hospitality (down by 2.6%) and Construction (down by 2.2%).
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.
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.
Note: because of the volatility and uncertainty in Labour Force Survey estimates highlighted by ONS, we do not report on quarterly changes in employment, unemployment and inactivity rates, only the direction.
For March to May 2024:
The 16-64 employment rate in London was estimated at 74.8%; this represents an increase of 1.1pp from a year earlier, and a fall on the quarter.
The overall UK employment rate was estimated at 74.4%, a decrease of 1.1pp on the year, roughly stable on the quarter.
The employment rate in London compares to a high of 78.4% in the South-East, and a low of 68.7% in Wales.
London and UK rates
Source: ONS Labour Force Survey.
Note: The margin of error is
±1.8% for London and ±0.6% 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 ±1.5% to ± 3% 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.
Note: because of the volatility and uncertainty in Labour Force Survey estimates highlighted by ONS, we do not report on quarterly changes in employment, unemployment and inactivity rates, only the direction.
For March to May 2024:
The unemployment rate for London was estimated at 5.1%. This represents an increase of 0.1pp from a year earlier, and an increase on the quarter.
The UK unemployment rate was estimated at 4.4%,an increase of 0.4pp on the year, and a rise on the quarter.
London’s unemployment rate was the third-highest in the country. It compares with a high of 5.6% in the East Midlands, and to a low of 2% in Northern Ireland.
London and UK rates
Source: ONS Labour Force Survey.
Note: The margin of error is
±1.0% for London and ±0.3% 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 ±1.5% 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. The main categories in this group are students, people who are looking after family/home full-time, and people who cannot work for health reasons (most of whom are long-term sick).
Note: because of the volatility and uncertainty in Labour Force Survey estimates highlighted by ONS, we do not report on quarterly changes in employment, unemployment and inactivity rates, only the direction.
For March to May 2024:
The rate of economic inactivity in London was estimated at 21.0%. This represents a decrease of 1.2pp from a year earlier, and a decrease on the quarter.
The UK rate of economic inactivity was 22.1%. This represents an increase of 0.8pp on the year, and is roughly stable on the quarter.
London’s inactivity rates compares to rates above 27% found in Northern Ireland, the North-East or Wales (where the highest rate is found, at 28.4%), and to rates below 19% in the South-West and the South-East (where the lowest rate is found, at 18.4%).
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%. 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.
Online job postings
The number of online job postings is an indicator of the demand for labour in London. It is very timely and complements more traditional employment indicators.
We use online job postings data provided by Lightcast. Given the volatility associated with single-month estimates, the three-month average estimates provide a more reliable indication of short-term changes in the demand for labour.
Latest job posting estimates suggest there were 101,400 online postings for jobs in London in May 2024 (single-month estimate), a decrease of 26% on the year.
Following economic reopening from the COVID-19 pandemic, the three-month average number of online postings climbed rapidly from the low of June 2020 (56,800) to the high of June 2022 (182,500).
The number of online job postings then decreased sharply over the summer of 2022 before temporarily evening out around the beginning of 2023. Since then and into the first half of 2024, the level of recruitment activity has been steadily declining back towards pre-pandemic levels seen in late 2019.
Postings for jobs in London
Source: Lightcast.
Note: Data not seasonally adjusted. 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 June 2024 show that:
There were 325,000 people claiming unemployment-related benefits in London - equal to a seasonally adjusted claimant rate (as a proportion of residents aged 16 to 64) of 5.4%. This rate is up from 4.7% in June 2023.
Up until the early months of the Covid-19 pandemic, London’s claimant rate was in line with the UK’s. The gap opened then, and has not closed since. The UK’s claimant rate was 3.9% in June 2024.
Breakdowns by age group (which rely on non-seasonally adjusted data) show broad-based increases across age groups. The rise in London is significantly more pronounced than in the UK overall for younger age groups (16 to 34).
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 Mar 2024-May 2024 | Number* (thousands) | Rate** (%) | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Latest Estimate | Change on Quarter | Change on Year | Latest Estimate | Change on Quarter | Change on Year | |||||
Employment | ||||||||||
London | 4,773 | 16 | t | 97 | t | 74.8 | -0.5 | u | 1.1 | t |
England | 28,122 | 69 | t | -245 | u | 74.9 | 0.0 | v | -1.0 | u |
UK | 32,999 | 19 | t | -312 | u | 74.4 | -0.1 | u | -1.1 | u |
Unemployment | ||||||||||
London | 259 | 42 | t | 12 | t | 5.1 | 0.8 | t | 0.1 | t |
England | 1,326 | 72 | t | 114 | t | 4.5 | 0.2 | t | 0.4 | t |
UK | 1,528 | 88 | t | 133 | t | 4.4 | 0.2 | t | 0.4 | t |
Economic Inactivity | ||||||||||
London | 1,283 | -24 | u | -68 | u | 21.0 | -0.4 | u | -1.2 | u |
England | 7,713 | -65 | u | 304 | t | 21.5 | -0.2 | u | 0.8 | t |
UK | 9,383 | -21 | u | 390 | t | 22.1 | -0.1 | u | 0.8 | t |
Source: ONS Labour Force Survey. Quarter on quarter changes must be interpreted very cautiously, especially for London, given the recent volatility of estimates. | ||||||||||
Measuring the labour market
The ONS has published its latest labour market update covering Labour Force Survey (LFS) data for the three months ending May 2024 and real-time information (RTI) data up to June 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.