The UK labour market lost 695,000 jobs between March and August according to new figures released by the Office of National Statistic today. The report, based on company payrolls, also shows that the unemployment rate reached 4.1% in the period May to July. At first glance these figures do not seem as bad as they might have been, and there are even signs of a limited post-lockdown economic recovery. However, after digging a little deeper a more worrying picture emerges.
Starting with the good news: an unemployment rate of 4.1% is relatively low by historical and international standards, and is only 0.3% higher than the rate at the same time last year. In other areas there are even signs of a slight post-lockdown rebound. In August there were 434,000 vacancies advertised. While this was down 40% as compared to pre-pandemic it still represented a sharp increase from lows during earlier moments in the pandemic.
Weekly earnings have also risen slightly, thanks to two million workers returning from furlough in July. While they are still 0.1% lower on average when compared to the same month last year, this represented a clear recovery from the sharp drops during lockdown and immediately after lockdown.
But the economic pain that the lockdown has inflicted has not been distributed equally. The UK’s youngest workers, who will be looking to take their first step on the career ladder, have been hit particularly hard while older workers have not only managed to hang on to their jobs but their employment numbers have improved.
In the May-July period, 236,000 Britons aged 25-64 entered employment – with 25-34 year-olds leading the charge. Yet, at the same time, workers aged 18-24 recorded a record drop in employment of 146,000. The sharp spike in this age group is largely due to their tendency to work in some of the sectors worst affected by the pandemic such as hospitality, food services, and the arts.
Unemployment also looks to be starting to rise more sharply as well. The 3-month average may be 4.1% but monthly figures suggest that, by July, the unemployment rate had hit 4.4%, a sharp jump of 0.6% on June. It seems likely that the requirement that employers pay their normal contributions to their staff’s national insurance and pensions from August 1 accounted for a great deal of this rise.
Further increases are likely on the horizon. The Institute of Employment Studies expects 445,000 dismissals to have taken place in the three months between July and September this year. If one considers the end of the furlough scheme and potential increased social distancing measures, which the IES study did not, things look even more dire.
ONS estimates suggest that the number of employees on furlough has fallen from around 30% of the private sector workforce to 11%, but this still represents roughly 3 million workers. Furthermore, employers are now required to pay 10% of their furloughed employees’ salaries, topping up the government’s reduced contribution, and the scheme ending completely October 31. Further spikes in unemployment, similar to those in July if not worse, seem very likely.
Despite this, Chancellor Rishi Sunak seems adamant he will not extend furlough again beyond October 31. The only concession seems to be a few hints, dropped by Employment Minister Mims Davies, that targeted support in some form might be unveiled for sectors particularly hard hit by the pandemic in the Autumn Budget.
Speaking today, Labour leader Keir Starmer called for continued support for certain sectors particularly badly affected by the pandemic such as retail, hospitality, and aviation to replace the furlough scheme.
Addressing the Trade Unions’ Congress annual conference over Zoom this morning, Starmer said: “We all know the furlough scheme can’t go on as it is forever, but the truth is the virus is still with us and infections are increasing. It just isn’t possible to get back to work or reopen businesses. It isn’t a choice. It’s the cold reality of this crisis. So it makes no sense at all for the government to pull support away now in one fell swoop.”