Essex economists reveal biggest mismatch of vacancies and jobseekers since 2002

Economists have revealed there is the biggest misalignment between the sectors looking to fill vacancies and the focus of the people looking for jobs since data began in 2002.

The team from the University of Essex and University of Edinburgh say the economy could be creating 17.5% more jobs per quarter if there was better alignment and workers were willing or able to change the sectors they were searching in.

This is one of the key findings of a new interactive tool launched by the team which reveals latest UK labour market trends and also indicates the Great Resignation might be over.

Professor Carlos Carillo-Tudela, from the Department of Economics at Essex, who leads the team of researchers, said: “Labour shortages continue to be a problem in badly affected industries such as manufacturing, hospitality and catering. The worst hit industries are facing shortages not just due to high vacancies but because workers don’t want jobs in those industries.”

Professor Carlos Carillo-Tudela said the figures indicate the so-called Great Resignation is potentially finally coming to an end. Fewer workers are changing industry or occupation when they move jobs and are preferring to stay in jobs similar to their last job rather than making career moves. Total employment is now remaining around 400,000 workers below its pre-pandemic value, meaning that the labour market is far from recovered despite the low unemployment rate.

The research is supported by a grant from the Economic and Social Research Council and focuses on the impact of COVID-19 on unemployment and earnings inequality. The results are constructed from the UK Labour Force Survey (LFS) dataset, which is the nationally representative survey used to construct the official unemployment statistics.

The tool reveals how employment and inactivity are evolving, along with which sectors are doing better, which are losing workers and where those workers are choosing to go. Every quarter the researchers go through the latest data to build a Labour Market Snapshot and present a summary online together with explainers on economic terms.
As well as the usual data such as total employment or the unemployment rate, the analysis focuses on inactivity, vacancies, labour market flows, and mobility and reallocation across industries and occupations.

Analysis highlights

• Total employment remains around 400,000 workers below its pre-pandemic value, so the labour market is far from recovered despite the low Unemployment Rate. Employment is low because economic Inactivity is high. The recovery of employment seems to have stalled in the last quarter of data.
• Worker job finding rates from unemployment, employment, and inactivity are all high and have recovered from the lows experienced during lockdown. However, there is evidence of slowing in the last six months. For the job-to-job transition rate, this might mean that the so-called Great Resignation might finally be coming to an end.
• Aggregate vacancies are 60% above their pre-pandemic level, an all-time high. This is the source of the labour shortages plaguing the economy, and the vacancy filling rate is now lower than it was before the pandemic. The economy is far off its usual Beveridge Curve.
• The probability that an employed worker becomes unemployed is currently lower than it was pre-pandemic, so the risk of losing your job is not currently elevated. However, the rates at which workers transition from employment to another job, or to inactivity, are both elevated.
• Gross mobility across industries and occupations remains depressed. This means that fewer workers are changing industry or occupation when they move jobs and are preferring to stay in jobs similar to their last job rather than making career moves.
• The economy seems to have permanently changed and is settling down at a new composition of industries and occupations, with many sectors still much smaller than they were before the pandemic. In particular, the manufacturing, retail, and accommodation and food industries have shrunk at the expense of public administration and high skilled service industries. Skilled trades and managerial occupations have shrunk at the expense of professional and administrative occupations.
• Labour shortages continue to be a problem, both in the aggregate and for certain badly affected industries such as manufacturing and accommodation and food. The worst hit industries are facing shortages not just due to high vacancies but also due workers not wanting to search for jobs in those industries.
• The misallocation between the industries where firms are hiring and where workers are willing to work is now the worst it has been since our data began. The economy could be creating 17.5% more jobs per quarter if workers were willing or able to change the sectors they were searching in.

To view the latest data visit Covid Jobs Research: UK