Making learning and work count

Labour market LIVE from Learning and Work Institute
16 July 2020

  • The ONS figure for claimant unemployed is 2,631,400, down by 28,100 on last month, and the claimant rate is 7.3%.
  • The ONS figure for 18-24 claimant unemployed is 516,800 in June, up by 281,800 or 119.9% on March.
  • Vacancies in June recovered 17,000 after falling 479,000 between February and May.
  • Unemployment (official measure) is 1,347,000, and is up by 12,000 from last month’s published figure (quarterly headline down by 17,000) and the unemployment rate 3.9%, showed no change on last month and is down by 0.1 percentage points on last quarter.
  • The number of workless young people (not in employment, full-time education or training) is 1,042,000, up by 41,000 on the quarter, representing 15.1% of the youth population (is up by 0.6 percentage points).
  • Youth unemployment (including students) is 540,000, and has risen by 26,000 on the quarter.
  • The official employment rate is 76.4% (showed no change on last month’s published figure and has fallen by 0.2 percentage points in the preferred quarterly measure).

Learning and Work Institute comment

This full briefing supplements the short briefing we published earlier on Thursday 16th July.

The labour market figures published on 16 July show that the headline three month rolling average measures of employment and unemployment have hardly changed compared to the same figures published last month and claimant unemployment actually fell in June. These numbers are very surprising but in isolation may mislead. The labour market impacts of the Pandemic are still going to be massively negative.

Duncan Melville, Chief Economist at Learning and Work Institute, commented:

‘The headline numbers for employment and unemployment released today cover March to May of this year, and so might be expected to show a negative impact from the COVID-19 pandemic and the lockdown measures put in place by the Government in response. However, compared to the figures for February to April released last month they show just a small fall in employment and a small rise in unemployment. In addition, the timelier claimant count figures for June actually fell. It would be wrong, however, to assume from these figures that the labour market impacts of the Pandemic are going to be much less than we had all anticipated.

Taking a slightly longer perspective comparing the latest numbers against where things were prior to the lockdown and looking forward demonstrates that the labour market impacts of the Pandemic are still going to be enormous and negative.

The single month LFS figures indicate that between March and May employment fell by 183,000 and the timelier HMRC payroll numbers show that number of employees fell by 649,000 between March and June. However, employment levels are being held up by the Coronavirus Job Retention Scheme. The fall in employment has been small relative to the fall in economic output and total hours worked. Employment fell just 0.5 percent between the last week before the lockdown measures came into force in March and the last week of May. Total hours worked fell by 165.9 million hours or 16.0 percent over the same period. The 9.4 million furloughed employees count as being in work but are not actually working any hours. Hence in current circumstances hours worked represent the best measure of overall labour market activity. The result of the Coronavirus Job Retention Scheme is that employment levels are being held up while the fall in total working hours reflect the reduction in demand for labour required to produce economic output. Thus, not surprisingly, this percentage fall in hours worked fits much more with the 25 percent fall in economic output seen between February and May. If employment levels had fallen by 16.0 percent between the last pre-lockdown week and the last week of May then that would have represented a fall in employment of 5.3 million.

Looking at unemployment, which has been held down by the Coronavirus Job Retention Scheme, the weekly figures indicate that it has risen by just 42,000 between the last pre-lockdown week and the last week of May. In contrast, claimant unemployment has more than doubled from 1.24 million in March to 2.63 million in June.

Given the impact of the Coronavirus Job Retention Scheme, the most important factor driving future employment and unemployment levels is what happens as the support it provides is reduced and the scheme ends at the end of October. This month's apparently benign numbers represent the calm before the storm.

Vacancy numbers remain severely depressed. The single month vacancy numbers rose slightly in June, but even so vacancy levels at 333,000 are still less than half the levels seen in February before the onset of the Coronavirus crisis.

Furthermore, every day in recent weeks we have seen large scale redundancies being announced across many parts of the economy. Given the time it takes to follow redundancy processes we are unlikely to see these job losses in the figures until those for July and August are published which will not be until September and October. Consistent with this, a survey by the British Chambers of Commerce found that 29 percent of businesses expect to cut jobs in the next three months.

The scale of the coming unemployment crisis is indicated by the projections released by the Office for Budget Responsibility earlier this week. These set out a central scenario which suggested official unemployment could peak at 11.9 percent, which I estimate equates to just over 4 million, by the end of this year, and a downside scenario suggesting official unemployment might reach 13.2 percent or I estimate around 4 1/2 million by early next year.

Such an outlook demands radical policy action and the Treasury’s ‘Plan for Jobs’ announced last week contains some welcome initiatives, including:

  • The doubling in the number of work coaches: with the more than doubling in the number of claimant unemployed already, this is the least needed if job centres are to offer an effective service to help people back into work;
  • Over 250,000 more people are to be assisted with advice from the National Careers Service
  • The tripling of sector-based work academy placements. Sector based work academies have been shown to be effective at assisting people into work.

There were also measures aimed specifically at young people, and these are important as part of a strategy to avoid the possibility of prolonged unemployment ‘scarring’ young people’s subsequent labour market prospects:

  • Kickstart scheme - providing six-month work placements to young people at risk of long-term unemployment. This appears to be based on the former Future Jobs Fund which was shown to be effective at helping people to subsequently move into work
  • Tripling the number of traineeships providing work experience and training to young people

However, the headline grabbing Job Retention Bonus is poorly thought through and is very unlikely to prevent a coming wave of redundancies. The one-off payment of £1,000 to employers for every furloughed employee who remains continuously in work at the end of January next year is unlikely to persuade many employers to keep on workers they were intending to let go as the support from the Coronavirus Job Retention Scheme reduces and then finishes at the end of October.

Relative to the costs of keeping on an employee for at least three months the £1,000 bonus is too small to have any significant impact. The vast majority of payments to employers are likely to be made for jobs that would have been maintained anyway. This represents poor value for money and the money here would have been better spent on extensions of the Coronavirus Job Retention Scheme up to January in those sectors which continue to be particularly adversely affected by social distancing measures, including hospitality. ’

Chart 1: Universal Credit and Jobseeker’s Allowance

The ONS headline Jobseeker’s Allowance and Universal Credit claimant count fell by 28,100 in June, taking the total to 2,631,400. ONS' claimant count before seasonal adjustment has fallen by 35,500 to 2,633,900. This change is directly comparable to the local level claimant count changes published today.

chart 8
Chart 2: UK unemployment (ILO)

The latest unemployment figure is 1,347,000. It has risen by 12,000 from the figure published last month. The unemployment rate remained at 3.9%. chart 1
Chart 3: Youth unemployment

The number of unemployed young people has risen by 12,000 since last month’s figures, to 540,000.

Meanwhile, the number of young Universal Credit or Jobseeker’s Allowance claimants rose last month by 24,275, to 516,00. chart 7
Chart 4: Vacancies – whole economy survey

Headline vacancies fell sharply this month, to 333,000. The ONS' experimental single-month vacancy figure shows a small recovery from 316,000 in May, to 333,000 in June. The headline ONS vacancy figure is both seasonally adjusted and a three- month average. The chart shows both series. chart 13
Chart 5: Experimental single month vacancies – whole economy survey

The Office for National Statistics experimental single month vacancy estimates include sectoral information. As these are not seasonally adjusted, it is fairer to use an annual change. chart 13
Chart 6: Unemployment rates by age

The 18 to 24 year old unemployment rate (including students) is 11.1% of the economically active – excluding one million economically inactive students from the calculation. The rate for those aged 25 to 49 is 2.8%. For those aged 50 and over it is 2.4%. The quarterly change is up 0.6 for 18 to 24 year olds, no change for 25 to 49 year olds, and down 0.5 for the over-50s. chart 5
Chart 7: Young people not in employment, full-time education or training

The number of out of work young people who are not in full-time education (1,042,000) has risen in the past quarter by 41,000 , or 4.1%. The rise was entirely among the inactive, with the number of unemployed young people not in full-time education or training falling. chart 6
Chart 8: UK employment

Employment fell by 44,000 on the figure published last month, to 32,948,000. chart 15
Chart 9: Employment rate in the UK

The employment rate has fallen by 0.2 percentage points over the quarter, to 76.4%. chart 16
Chart 10: Claimants for inactive benefits and the economically inactive – inactivity benefits

The number of people inactive owing to long-term sickness fell, as did the benefit figure.

This chart shows claimants of Employment and Support Allowance, and Incapacity Benefit (the orange dots), compared with survey figures for the economically inactive owing to long-term sickness. chart 17
Chart 11: Claimants for inactive benefits and the economically inactive – lone parents

This chart shows claimants of out of work benefits as lone parents (the orange dots) and survey figures for all those who are economically inactive looking after family (including couple families). The survey figures (showing those looking after family) continued to fall while benefit measures had fallen earlier.

The benefit figures include lone parents remaining on Income Support as lone parents and Universal Credit claimants in the planning for work group. The latest DWP data does not show any still on Jobseeker's Allowance.

This chart shows claimants of out of work benefits as lone parents (the orange dots) and survey figures for all those who are economically inactive looking after family (including couple families). chart 18
Chart 12: Employment rate quarterly change in regions – March 2020 to May 2020

This quarter, 6 regions showed a rise in the employment rate, led by the North East and Yorksire and the Humber. The employment rate fell in 6 regions, led by London and Scotland. chart 19
Chart 13: Unemployment rate quarterly change in regions – March 2020 to May 2020

7 regions showed an improvement in the unemployment rate this quarter. 5 showed a worsening. The rises were led by London and Scotland. chart 20
Chart 14 : Inactivity rate quarterly change in regions – March 2020 to May 2020

Overall, there was a 0.2 percentage point fall in the inactivity rate. 7 regions showed rises in inactivity, led by Northern Ireland and Scotland. chart 21
Chart 15: Hours actually worked

The ONS experimental weekly data shows actual hours worked fell dramatically with the lockdown. This has slightly recovered in the latest data, particularly for self-employed workers. The average weekly hours for employees (including furloughed employees) had fallen from 32.0 before lockdown to 25.6 in April, but recovered to 27.0 at the end of May. For self-employed workers, the fall was harder, from 31 to 19, and this has now recovered to 24.5. chart 2
Chart 16: Unemployed people per vacancy

There are 7.9 unemployed claimants per vacancy. chart 14

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