Monthly economic brief: April 2023

Labour Market

Unemployment has fallen to a record low amid tight labour market conditions.

Official labour market statistics

• The latest labour market statistics for December 2022 to February 2023 in Scotland show there were 2.7 million people in employment with the employment rate rising by 0.8 percentage points over the year to 75.7% (UK: 75.8%). 84,000 people were unemployed with the unemployment rate falling 0.5 percentage points to 3.0% (UK: 3.8%), the lowest on record. Scotland's inactivity rate fell 0.4 percentage points over the year to 22% (UK: 21.1%) with 758,000 people economically inactive in Scotland. The primary reason for economic inactivity is long term sickness. ^[9]

• Latest PAYE data signals a further increase in employment in March with the number of PAYE employees rising by 1,000 over the month and is 1.3% higher than in March last year. ^[10]

Demand and supply of staff

• Business surveys signal that labour market conditions have remained tight in March; however recruitment activity shows further signs that it has moderated compared to the first half of 2022.
• The RBS report on Jobs for March signalled that growth in permanent staff placements (47.6) fell for the fifth time in the past six months, following growth in January. ^[11] Growth in demand for staff remained positive (53.9) but had slowed to its softest rate in over two years. For businesses seeking to recruit, supply side challenges in the labour market have also continued with candidate availability (labour supply) falling in March (39.9), with uncertainty in the economic outlook for the coming year weigh on both the demand and availability of labour.

• The underlying tightness in the labour market continued to provide upward pressure to starting salaries in March, however the pace of growth continued its downward trend and eased over the month (63.6) to the softest rate seen in 23 months.
• Labour shortages are affecting a range of sectors with BICS data indicating 39.1% of businesses experienced a shortage of workers at the start of April.^[12] The overall share has fallen from the start of September when it was 44.5%, however remains highest in accommodation and food services (47.1%) and construction (45.6%).

• Furthermore, when asked about recruiting in March, 38.4% of all businesses reported experiencing difficulties recruiting employees. This is highest within construction (46.9%), accommodation and food services (42%) and arts, entertainment and recreation (41.1%).
• Most businesses responded that a low number of applications (62.9%) and a lack of qualified applicants (60.7%) were reasons for why the business experienced difficulties in recruiting employees, while 26.5% reported not being able to afford an attractive pay package to applicants.

Earnings

• Nominal median monthly PAYE earnings fell 0.9% in March to £2,237. However, the monthly figure can be volatile, and over the past year earnings have grown 8.1%. ^[13]
• However, adjusting for inflation, which was 10.1% in March, real median earnings fell 1.8% on an annual basis, the fourteenth consecutive month of negative annual growth.

• The annual falls in real earnings are generally softening, however continue to emphasise the cost-of-living challenges that are facing individuals and households.