In historical terms, the current unemployment rate of around 5% isn’t much to write home about. You only need go back to 2011 for a rate of over 8%, to 1993 for a rate of over 10% and 1984 for one of almost 12%. However, there are plenty of reasons why even at this level, it’s incredibly unsettling – and why it’s important to consider what it could mean for you.
The main concern for many people is that things are moving in the wrong direction. Unemployment is rising, and the pace has picked up very slightly, redundancies are up over the year and job vacancies are falling. It means workplaces are more likely to be laying people off, so those who remain in work feel less secure.
When things are steadily getting worse, it’s difficult to know where this will end. The Office for Budget Responsibility is optimistic, expecting it to remain around 5% for a while and then drop back closer to 4.1% by 2027. The Bank of England thinks it’ll hang around for longer at the current level; however the monetary policy committee admitted there’s a risk it could be higher than expected.
There are a couple of potential spanners in the works. There’s the massive unknown quantity of AI, which has started to impact hiring decisions, and is only likely to play an increasingly important role as the technology improves.
A Kings College study found that those businesses with the most AI crossover have cut staffing by 4.5% and junior positions by 5.8%. They were also 16.3 percentage points less likely to advertise new jobs. It’s one reason why the ONS data shows the unemployment rate of those aged 18-24 in November was almost 13% and the employment rate less than 61%.
Interestingly, the loss of junior roles has an impact on the jobs market that may look at first glance to be a sign of strength. As junior roles go, it automatically means that average pay among those who remain in their jobs increases. It means we may see average pay rises and assume it’s a positive, when part of the movement will be directly as a result of job losses.
There’s also the risk that businesses are reluctant to invest in new staff. There’s a horrible level of uncertainty in the wider world, coupled with incredibly sluggish economic growth and the worry about business taxes every time there’s a budget.
Meanwhile, it has been 10 years since the consumer confidence index was in positive territory, so as people hold back on purchases, companies aren’t keen to expand.
This lack of confidence has led to cost-cutting, including the so-called ‘delayering’ of the workforce: removing levels of middle managers.