Latest figures masking true extent of UK’s employment crisis, say experts

Situation likely to worsen in the autumn and winter as furlough scheme ends and young people enter the labour market, commentators warn

Official figures showing the number of UK workers on payroll dropped by 649,000 between March and June fail to show the true extent of the crisis, experts have warned.

Office for National Statistics (ONS) data showed the number of paid employees in Britain had fallen by 2.2 per cent (649,000) compared to March 2020, while the number of hours worked in Britain between March and May 2019 and March to May 2020 fell to a record low. Hours worked each week dropped by 16.7 per cent (175.3 million) to 877.1 million hours in total, marking the most drastic annual decrease since records began in 1971. 

Gerwyn Davies, senior labour market adviser at the CIPD, said the “sting in the tail is the record fall in demand for workers” and a sharp drop in the number of hours worked. “The situation can only deteriorate rapidly over the rest of the summer and into the autumn as young people enter the labour market,” he said, urging employers to only make redundancies as a last resort and to explore other options first. 

“This could include restricting overtime, cutting bonuses and deferring salary increases,” he said. 

Think tank the Resolution Foundation also called into question ONS figures that showed unemployment rose by just 34,000 in April to reach 1.3 million. It said this headline data failed to show the “true extent of Britain's jobs crisis” and called on the body to provide a clearer picture. 

Experts also highlighted that the number of workers on furlough who might be let go once the scheme ended in autumn was another factor masking the true extent of the employment crisis facing the UK.

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"We are in the midst of a labour market crisis, yet today's headline employment and unemployment figures are barely changed. This is a result of both measurement problems and the coronavirus job retention scheme – under which nine million workers have been furloughed – which has kept people employed for now,” said Stephen Evans, chief executive of the Learning and Work Institute.

“The real question is what happens when the furlough scheme ends. This week the Office for Budget Responsibility (OBR) projected that 15 per cent of furloughed workers – 1.4 million people – will not be able to return to their previous jobs. The government must look at a flexible extension to the scheme, and put in place urgent support for those at risk of losing their jobs.”

ONS estimates for March to May showed that 32.95 million people aged 16 years and over were in employment, 126,000 fewer than the previous quarter.  

But earlier this week (14 July) the OBR warned that, in a worst-case scenario, where no vaccine was found and social distancing continued indefinitely, unemployment would rise to four million. It also claimed UK unemployment levels could rise beyond those seen in 1980. 

Separately, a British Chambers of Commerce survey predicted a third of businesses (29 per cent) would cut their workforces in the next three months, reflecting the impact of the coronavirus lockdown on the UK's economy. 

Kirstie Donnelly, chief executive at City & Guilds Group, said it was critical employers acted now and used “all ammunition available to provide training and jobs lifelines to those most in need” by providing opportunities to gain news skills needed to access meaningful employment. 

Mike Brewer, chief economist at the Resolution Foundation, described Britain as “in the midst of an unprecedented economic shock”. He said “unemployment was forecast to hit four million for the first time ever. And yet our official data [was] failing to show the true extent of this jobs crisis.”

The ONS also revealed that from April to June there were an estimated 333,000 vacancies in the UK, a 59 per cent drop (497,000 lower) on the previous year. This marked the lowest level since the Vacancy Survey began in 2001, and the “largest annual and quarterly falls in the history of the data time series”.  

The largest quarterly decreases by industry were seen in the wholesale, retail trade and motor vehicle repair sector, down by 70 per cent (92,000), and in accommodation and food services, which were down by 91 per cent (78,000) and reflected the impact of lockdown closures. 

However, recent REC data showed that since lockdown was eased at the end of June, job vacancies rose. The total number of active job adverts hit 1.05 million in the week of 6-12 July, up from 990,000 in the final week of June, with 106,000 new job adverts posted that week (up 14,000 on the previous week). 

But Neil Carberry, chief executive of the Recruitment & Employment Confederation, pointed out that while the figures were encouraging, the economy would not be “out of the woods” for some time. He added though that reopening offices would “deliver a further boost in confidence and get Britain’s world-leading services industries going”.

CV-Library's founder and chief executive, Lee Biggins, echoed others’ scepticism that the latest figures presented the full picture. “We are starting to see [vacancy] numbers pick back up and last week was a record week for new jobs. However, the sad truth is that unemployment could, and will most likely, rise sharply in early 2021, unless more businesses are able to create new employment opportunities for everyone – not just young people,” said Biggins. 

Tony Wilson, director of the Institute for Employment Studies, said the figures showed a clear weakening of the job market, which was displaying “no signs of recovery” despite emergency measures to protect jobs and incomes.

“Perhaps of most concern, today’s data confirms that the hiring market has collapsed – with new starts to employment running at just half of pre-crisis levels, and vacancies falling by three-fifths,” said Wilson. He added that the furlough scheme had led to a stagnant hiring market and that if recruitment did not bounce back through autumn and winter, “yet more measures to stimulate growth” may be needed.

Last week (8 July) chancellor Rishi Sunak announced a raft of measures to protect jobs and restart the economy after lockdown, including a job retention bonus, awarding employers £1,000 for every furloughed worker still in employment by January 2021, and £2bn funding for six-month work placements for young people at risk of long-term unemployment. 

But Davies said the chancellor’s measures didn’t go far enough given the unemployment crisis on the horizon. “More support will be needed beyond the job retention bonus and, as a first step, the government needs to consider extending the job retention scheme in the worst-hit sectors until at least December,” he said.