London Labour Market Update
Ammar Ljubijankić Kutasi, September 2023
Wage growth is starting to fall behind inflation again and new data
also confirmed a sizeable fall in the number of London jobs earlier this
year, while more timely estimates suggest this decline is continuing.
Estimates from household surveys show London’s employment rate
fell by 2.1 percentage points (pp) on the quarter to July, while
inactivity increased by 2.0pp. These are very large changes, from what
is already a noisy data source, but do suggest London’s labour market is
on the slide. However, administrative data show no change in employee
jobs in August. Quarterly Workforce jobs figures from employer surveys
show a small increase in the employee component but a steep fall in the
(less-reliable) self-employed component from March to June.
While real pay growth for employees was positive on the year in both
June and July, it fell month-on-month as nominal pay growth appears to
be slowing — large increases this summer may have been due to one-off
bonuses in the public sector. Though the number of payrolled
employees remained stable in London overall, central London boroughs are
seeing falls in resident employees.
Summary of key points
The most timely estimate of payrolled employees (subject to revision) showed no change in London between July and August 2023 and an increase of 1.7% on the year.
The employment rate in London was estimated at 73.5% for the three months ending July 2023, down 2.1 percentage points (pp) on the previous quarter and down 1.3pp on the same period in the previous year. London’s employment rate was lower than the UK average (75.5%).
The unemployment rate was still higher than the UK average. London’s unemployment rate was estimated at 4.8%, up 0.3pp on the quarter and up 0.5pp from a year earlier. The UK average was 4.3%.
London’s inactivity rate (the measure of those not looking and/or not available to work) was estimated at 22.7%. This was up 2.0pp on the previous quarter and up 1.0pp on the previous year, and was higher than the UK-wide estimate of 21.1%.
The total number of workforce jobs decreased by 72,000, or 1.1%, between the first and second quarter of 2023, and was 228,000, or 3.6%, 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 August 2023, unchanged on the previous month.
The latest London estimate represents an increase of 73,800, or 1.7%, on the previous year (August 2022) against a UK average increase of 1.5% (see charts).
Relative to pre-pandemic (February 2020) levels, the number of payrolled employees in London was up by 165,000, or 4.0%. This compares to an increase of 3.9% across the UK on average.
The figures for August 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 August 2023:
Median monthly pay in London was £2,700, an increase of 5.4% on the year.
In the UK overall, median pay was £2,260, up by 6.7% 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 August 2022 to August 2023:
The region/country with the highest growth in median monthly salary was Scotland at 7.9%.
The region/country with the lowest growth in median monthly salary was London at 5.4%.
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 July 2023, the latest month for which CPIH inflation data is available:
The year-on-year CPIH rate in the UK was 6.4%.
Nominal employee pay was up by 6.6% on the year in London, resulting in an increase of 0.1% 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.
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 May to July 2023:
The 16-64 employment rate in London was estimated at 73.5%; this represents a decrease of 2.1 percentage points (pp) on the previous quarter and a decrease of 1.3pp from a year earlier.
The overall UK employment rate was estimated at 75.5%, a decrease of 0.5pp on the quarter and an increase of 0.1pp on the year.
London and UK rates
Source: ONS Labour Force Survey.
Note: The margin of error is
±2.2% 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 ± 3.2% 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 May to July 2023:
The unemployment rate for London was estimated at 4.8%; this represents an increase of 0.3pp on the previous quarter and an increase of 0.5pp from a year earlier.
The UK unemployment rate was estimated at 4.3%, an increase of 0.5pp from the previous quarter and an increase of 0.7pp on the year.
London and UK rates
Source: ONS Labour Force Survey.
Note: The margin of error is
±1.1% 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 ±2.1% 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 May to July 2023:
The rate of economic inactivity in London was estimated at 22.7%; this represents an increase of 2.0pp on the previous quarter and an increase of 1.0pp from a year earlier.
The UK rate of economic inactivity was 21.1%; this represents an increase 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 August 2023 show that:
There were 299,000 people claiming unemployment-related benefits in London - equal to a claimant unemployment rate (as a proportion of residents aged 16 to 64) of 4.9%.
The number of claimants in London has increased by 19,000, or 6.8%, on the year, compared to an increase of 30,100, or 2.0%, 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. 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 June 2023 show that:
The total number of workforce jobs in London was estimated at 6.5 million, a decrease of approximately 1.1% from March 2023 against a UK average of -0.4%.
The latest estimate represents an increase of approximately 228,000, or 3.6%, from levels the year before, compared with an increase of 1.5% 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 595,000 (11.3%) while the self-employment jobs estimate has decreased by 193,000 (23.4%).
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 June 2022 and June 2023*:
Arts & recreation recorded the largest percentage decrease in jobs in London (-23,100 or -9.9%); this was followed by Manufacturing (-12,900 or -9.4%) and Education (-34,400 or -7.5%).
The following industry groups shown in the chart saw the largest positive percentage change in jobs in London:
- Hospitality (56,800 or 13.9%)
- Health (67,400 or 11.2%)
- Transport & storage (18,200 or 6.7%)
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 June 2023*:
Manufacturing recorded the largest percentage decrease in jobs in London (-12,200 or -8.9%); this was followed by Transport & storage (-26,900 or -8.4%) and Construction (-23,400 or -7.4%).
The following industry groups shown in the chart saw the largest positive percentage change in jobs in London:
- Professional services (152,000 or 18.7%)
- Finance & insurance (69,600 or 17.1%)
- Information & communication (81,800 or 15.7%)
Source: ONS Workforce Jobs.
Note: The margin of error for all
jobs is +/- 1.7% for London and +/- 0.6% for the UK.
Summary of headline indicators
Headline estimates for May 2023-Jul 2023 | Number* (thousands) | Rate** (%) | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Latest Estimate | Change on Quarter | Change on Year | Latest Estimate | Change on Quarter | Change on Year | |||||
Employment | ||||||||||
London | 4,717 | -182 | u | -79 | u | 73.5 | -2.1 | u | -1.3 | u |
England | 27,848 | -254 | u | 106 | t | 75.8 | -0.7 | u | -0.1 | u |
UK | 32,882 | -207 | u | 135 | t | 75.5 | -0.5 | u | 0.1 | t |
Unemployment | ||||||||||
London | 236 | 7 | t | 23 | t | 4.8 | 0.3 | t | 0.5 | t |
England | 1,260 | 136 | t | 196 | t | 4.3 | 0.5 | t | 0.6 | t |
UK | 1,464 | 159 | t | 240 | t | 4.3 | 0.5 | t | 0.7 | t |
Economic Inactivity | ||||||||||
London | 1,403 | 127 | t | 68 | t | 22.7 | 2.0 | t | 1.0 | t |
England | 7,281 | 122 | t | -142 | u | 20.7 | 0.3 | t | -0.5 | u |
UK | 8,780 | 63 | t | -231 | u | 21.1 | 0.1 | t | -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 July 2023 and real-time information (RTI) data up to August 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.