North East businesses struggle to fill posts as unemployment falls and inactivity rises

The North East unemployment rate continued to edge down over the most recent three-month period, and there are now more pay-rolled employees in the NELEP (North East Local Enterprise Partnership) area than before the Covid-19 pandemic. But the regional jobless rate remains the highest in the UK outside London, according to figures released today by the Office for National Statistics (ONS).

Meanwhile, more workers are leaving the labour market altogether and businesses are struggling to fill a record number of vacancies, according to the North East England Chamber of Commerce.

The region’s jobless rate was 5.1% in the July-September period compared with 5.2% in June-August. At the same time the UK national rate fell from 4.5% to 4.3% and the London rate from 5.8% to 5.6%.

Over the same two quarters the economic inactivity rate in the North East rose by 1.3% to 25.4%, the highest in the UK apart from Northern Ireland, while the employment rate fell 0.9% to 70.7%, the lowest apart from Northern Ireland.

Viewed over the past year, the North East has enjoyed the UK’s largest fall in unemployment of 1.4% but also experienced the largest increase in the economic inactivity rate of 2.1%, ahead of Yorkshire and the Humber (up 1.7%) and the North West (up 0.8%).

As the Covid-19 furlough scheme came to an end, the regional picture was therefore one of unemployment falling slowly but more people leaving or failing to enter the labour market, with the overall result that the proportion of people in jobs was down.

North East unemployment stands at 64,000, a fall of 10,000 (12.9%) over the quarter and a fall of 20,000 (23.6%) over the year. Employment stands at 1,145,000, a fall of 16,000 (1.35%) over the quarter and a fall of 19,000 (1.6%) over the year.

Richard Baker, Strategy and Policy Director of NELEP said: ‘Today’s figures show furlough has been successful in containing the rise of unemployment amongst employees throughout the pandemic. Early commentators suggested the impact of COVID-19 could see North East regional unemployment exceed 10% but today it is around just half that at 5.1%.

‘They also show a bounce back in employee numbers in the region. Between February and November 2020, pay-rolled employee numbers in the NELEP area fell by almost 20,000 or 2.5%. However, between November 2020 and October 2021, numbers increased by almost 32,000, resulting in a figure 1.5% higher than it was pre-pandemic – which is good news. But there are also significant challenges.

‘Whilst we’ve had the largest decrease in the unemployment rate over the last year, this has not been accompanied by an increased employment rate. Instead, the economic inactivity rate has increased by more than in any other English region, with an additional 32,000 working age people being inactive compared to the same period of 2020. Recent increases in inactivity have been particularly large among older workers.

‘There is more work to do to understand the detail behind these changes. However, we can see that the North East region has about 4,200 fewer employees in manufacturing than pre-COVID, with decreases in some service sectors too. Meanwhile there have been large increases in the number of employees in sectors such as health, science and education as our economy changes.

‘Experimental data produced this month seems to confirm the trend we saw last month that we are seeing large numbers of older workers leaving the labour force, as well as continuing challenges for the very youngest.

‘Both the North West and Yorkshire and the Humber have also experienced falling employment and rising inactivity, but this is not true elsewhere in England, highlighting the need for distinct employment policies for the North.’

Niamh Corcoran, Policy Adviser at the North East England Chamber of Commerce said: ‘Today’s labour market figures continue to paint a mixed picture. Whilst unemployment has fallen by 12.9% over the quarter, employment levels have also fallen by 1.35% and regional levels of economic inactivity have risen at the fastest rate in the country.

‘Long-term ill health and new-found caring responsibilities seem to be the primary driver of this trend. The government should do more to support those in economic inactivity, where possible, to re-enter employment. 
 
‘Staff shortages continue to be a problem for businesses, with vacancy levels again reaching record highs this month. Businesses are continuing to struggle to find the staff and skills they need in their business. If this trend continues, it is likely that businesses will be unable to operate at full capacity and productivity will suffer. 
 
‘It is clear that more needs to be done to bridge the economic inactivity gap and make it easier for businesses to recruit the talent they need. This includes more investigation into rising levels of long-term ill health and bespoke support for those in economic inactivity to re-enter work, as well as an expanded upskilling and retraining offer for adults to better equip workers with the skills businesses need.’