On top of the low unemployment statistics, PwC said that there has been an increase in economic inactivity with 500,000 dropping out of the labour market due to long-term and chronic illness.
BCC head of people policy Jane Gratton said with firms doing their best to keep afloat during a period of spiralling costs, they are also facing an extremely tight labour market that is further impacting their ability to invest and grow.
“Despite a second month of a decrease in job vacancies, the overall number of vacancies in the labour market remains high,” she said.
“During a period of increasing inflation, and a stagnant economy, we cannot afford to let recruitment problems further dampen growth.
“The cost-of-doing-business crisis is intensifying the challenges present in the already tight labour market, as it is having a significant impact on firm’s abilities to invest in the workforce. As rising costs force businesses to put investment plans on hold, budgets for people training and development are taking a hit.
“Government can help by reducing the upfront costs on business and providing training related tax breaks, increasing flexibility in the apprenticeship levy, and ensuring job seekers have access to rapid retraining opportunities.
“The Shortage Occupation List (SOL) must also be reformed to include more jobs at more skill levels, to give firms breathing space to train and upskill their workforce.”
However, Jake Finney, economist at PwC UK, said the latest job market data showed the UK’s labour market continues to be tight but there are early signs it is starting to cool.
“The unemployment rate reached its lowest rate since 1974, as it decreased 0.2 percentage points on the quarter, to 3.6 per cent for May to July 2022,” he said.
“However, the number of vacancies posted fell for the third consecutive period, suggesting that the wider slowdown in economic activity is starting to weigh on the demand for labour.
“There were also further rises in economic inactivity, with the number of people not seeking work now around 900,000 higher than pre-pandemic levels. This increase has primarily been driven by a rise in long-term sickness, likely owing to a combination of long Covid and large NHS waiting lists. Helping some of these people to return to work could help to boost employment by as much as 3 per cent.
“Workers are seeing their real pay fall at almost the fastest rate this century. Total pay fell by 2.6 per cent on the year to May to July 2022, while regular pay fell by 2.8 per cent.
“Our analysis suggests this squeeze on living standards will continue to tighten, with real wages potentially around 5 per cent lower than their 2021 levels by the end of 2022. This means that the average worker will be around £30 worse off a week and £1,400 worse off a year.”
