Monthly economic brief: February 2022

Labour Market

Unemployment remained low in the final quarter of the year while vacancy rates and staff shortages persist.

Official labour market statistics, payrolled employment and claimant count

• The latest labour market statistics for October to December 2021 in Scotland show there were 2.65 million people in employment (rate of 74.1%, up 0.8 percentage points over the year), 112,000 people unemployed (rate of 4.1%, down 0.5 percentage points) and 773,000 people economically inactive (rate of 22.6%, down 0.5 percentage points).^[9]

• Wider labour market indicators showed signs of further strengthening in the labour market in January. Pay As You Earn (PAYE) Real Time Information estimates for January 2022 indicate the number of payrolled employees in Scotland remained broadly stable over the month at 2.4 million, however was 30,938 (1.3%) more than in September at the end of the furlough scheme. Furthermore, there were 14,000 more payrolled employees than the pre-pandemic level in February 2020.^[10]

• Scotland's Claimant Count (the number of claimants of Job Seekers Allowance and claimants of Universal Credit claiming principally for the reason of being unemployed) also continued its downward trend in January, down 2.5% over the month to 140,500; a claimant count rate of 4.4%.
• Overall, the claimant count has fallen 36.4% from its peak in August 2020 and 11.7% since September when the furlough scheme ended. However, it remains 26,800 (24.4%) higher than its pre-pandemic level in February 2020.^[11]
• Further underlying changes continue to emerge in the labour market as it recovers from the pandemic. While employee numbers have risen above their pre-pandemic level, the overall level of employment remains below, reflecting that the number of self-employed has fallen.^[12]

• One of the main impacts of the furlough scheme was that people worked fewer hours, even though they remained in employment. After falling heavily at the start of the pandemic, average actual weekly hours of work have now returned to around pre-pandemic levels. In October to December 2021, average total weekly hours was 31.6, up from 29.2 hours during the same period in 2020 and up from 30.7 hours during the same period prior to the pandemic in 2019.^[13]

Demand for staff

• Business surveys have also signalled that labour market tightness has persisted into the start of 2022 with strong demand for staff while recruitment challenges continue.
• The latest Report on Jobs signalled that overall demand for staff continued to grow in January (69.6), and remains high compared to historical standards. However, the rate of growth eased over the month, continuing its downward trend from over the second half of 2021, with demand for permanent staff stronger than for temporary staff.^[14]
• Supply side challenges in the labour market have also continued with candidate availability (labour supply) continuing to fall for a twelfth month, however the rate of fall was at its weakest rate since May 2021.

• More recent online vacancies data signal that strong demand for staff continued into February, with online job vacancies 44.2% higher than in February 2020.^[15]
• The strength in demand for staff, coupled with low unemployment and falls in candidate availability has meant upward pressure on starting salaries has remained elevated at the start of the year, particularly for permanent roles.
• Labour shortages also continue to affect a range of sectors with 34% off businesses experiencing a shortage of workers into the start of February. This is down from 38% in October, however remains most notable in transport and storage (42%), construction (40%), accommodation and food services (38%) and manufacturing (32%).^[16]

• Reflecting this, 38% of businesses in January, reported their ability to fill vacancies remains more difficult than normal for the time of year, down from 47% in October, while the share of businesses reporting no difference in their ability to fill vacancies increased to 27% (up from with 22% in October).^[17]

Earnings

• Mean PAYE monthly pay fell sharply at the start of the pandemic, however strengthened over the course of 2020 and rebounded back above its pre-pandemic level in August 2020.^[18],[19]

• Latest data show mean monthly pay grew by 0.7% over the month in December (UK: 1.3%), and grew 5.2% annually (UK: 5.6%) to £2,558 (UK: £2,805).
• However, the CPI annual inflation rate was 5.4% in December, and is weighing notably on real earnings growth.