Friday, June 21, 2024

Why Britain’s biggest problem keeps breaking records

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This is particularly worrying for economic growth. Almost all of the economy’s expansion has been driven by the rising number of people in work in recent years, according to Tony Wilson, director of the Institute for Employment Studies.

“For the last 20 years or more, economic growth has been driven by employment growth rather than productivity. So when employment stops growing, so does the economy,” he says.

“That’s why the big rises in economic inactivity and stagnant jobs figures really matter for the economy and living standards.”

Sunak said GDP growth of 0.6pc at the start of the year was a sign that his economic plan was working and “things are starting to feel better”.

However, the shrinking pool of people in work suggests this may prove to be a short-lived blip.

“Almost all of this is being driven by more people spending a long time out of work – it’s fewer people entering work rather than more people leaving work that is the problem,” says Wilson. 

Companies are still hiring enthusiastically, with more than 900,000 job vacancies on offer. That is down from the post-lockdown peak of 1.3 million, but is still above pre-pandemic levels when the economy was creating jobs hand over fist.

Much of the pre-Covid jobs growth was driven by a buoyant private sector. Businesses were growing fast, and they needed more workers.

At the same time, the Government was keen to save money and slim down the public sector.

More recently, that pattern has gone into reverse.

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