It’s National Sickness Day. Is ill health holding back the UK economy?

The first Monday in February is apparently the most popular day for employees to call in sick, so the timing of the latest health check on the labor market by the British number crunchers could hardly have been better.

Britain has an even bigger problem with inactivity due to long-term illness than previously thought, according to the latest data.

New figures from the Office for National Statistics suggest that there are now 2.8 million people classified as not looking for work due to health problems – an increase from the 2.6 million previously estimated and an increase of a third from the 2.1 million before the Covid-19 pandemic.

The ONS has revised its view of what has happened to employment, unemployment and inactivity to take into account that the size of the UK population has been revised upwards. The preliminary conclusions are that the labor market is bigger, sicker and tighter than the old data suggested.

Although the ONS has been at pains to warn against reading too much into the new estimates, they show that employment is 170,000 higher than thought, but there are more people in the prime age range (16 to 64) who are not working or looking for a job, and long-term illness now accounts for more than 30% of inactivity.

Hannah Slaughter, a senior economist at the Resolution Foundation think tank, said: “Tackling rising ill health is a huge social and economic challenge we will face in the 2020s, as is reducing employment in Britain to pre-crisis levels. pandemic levels.”

The ONS view of recent short-term developments has also changed. She believes unemployment in the three months ending November last year was 3.9%, lower than the previous estimate of 4.2%.

The Bank of England is closely monitoring the labor market for signs that wage pressures are easing. Analysts said the new ONS estimates could make Threadneedle Street’s monetary policy committee more cautious about cutting interest rates.

“The new figures show that the labor market is tighter than previously assumed. Furthermore, there is no evidence that conditions have eased recently,” said Investec’s Philip Shaw.

James Moberly of Goldman Sachs said: “The decline in the unemployment rate suggests that progress on rebalancing the labor market may have stalled, with somewhat aggressive implications for the Bank.”

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The reason the ONS warned against reading too much into the new data is that it lacks a full picture of the labor market after suspending statistics from what had been its main gauge of developments – the Labor Force Survey – on the basis the fact that the weak response rates made the results unreliable.

The LFS was replaced by an experimental series based on a range of sources including claimant counts and PAYE data. It will take until September before the ONS is ready to announce its replacement for the LFS.

Samuel Tombs, the chief UK economist at Pantheon Macro, said the ONS still had “little confidence” in the quality of its figures and was only prepared to say that the unemployment rate “may have fallen”. He said more recent evidence, including rising layoff notices, showed rising unemployment.