The number of employees on payrolls is down 695,000 compared to March this year, according to official data, with young workers bearing the brunt of job cuts.
The estimates, published by the Office for National Statistics (ONS), revealed this drop to be the largest since 2009 when comparing both quarterly and annually.
The ONS found Britain’s unemployment rate increased to 4.1 per cent between May and July, compared to 3.9 per cent the previous quarter. This was also 0.3 percentage points higher than during the same period in 2019.
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Darren Morgan, director of economic statistics at the ONS, said some effects of the pandemic on the labour market were beginning to “unwind” in July as the economy “reopened” and businesses were allowed to trade again. But he said it was clear the Covid crisis would have a larger impact on the labour market in the coming months.
"With the number of employees on the payroll down again in August and both unemployment and redundancies sharply up in July, it is clear that coronavirus is still having a big impact on the world of work," he said.
The ONS data revealed young workers had been hit hardest, with the number of 16 to 24-year-olds in employment falling 156,000 in the three months to July. There was a record decrease of 146,000 in the number of workers aged 18 to 24 between May and July, when compared to the previous quarter.
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During the same period, there was also a decline in the number of older workers in employment, with those aged 65 and over decreasing by 92,000 to 1.28 million.
However, the number of people in employment among those aged 25 to 64 increased slightly by 236,000, with a record rise of 67,000 for women in the 25 to 34 age bracket.
Gerwyn Davies, senior labour market analyst at the CIPD, said the sharp decline in employment for young people at a time when a “new cohort of college and university leavers [were] looking for jobs” was the “real concern”.
“Given we know that overall employment prospects are likely to deteriorate considerably over the next few months as a result of the closure of the furlough scheme and economic conditions, the government will need to consider additional support beyond Kickstart to boost the job prospects of 16 to 24-year-olds,” Davies said.
The government’s £2bn Kickstart scheme was announced in July, with the aim of creating hundreds of thousands of new, fully subsidised jobs for young people across the country. Those aged 16 to 24, claiming universal credit and at risk of long-term unemployment, are eligible for the scheme. And employers are able to claim funding for each six-month job placement to cover 100 per cent of the national minimum wage for up to 25 hours a week.
But Davies said there was a need to build on the scheme by boosting investment in life-long learning and providing further “bespoke support” for the unemployed, including employability skills development and jobs brokerage support.
He added there was a “strong case” for the government to also consider a short-term working subsidy for the sectors hit hardest by the pandemic to protect employment levels over the winter.
Like Davies, David Phillips, managing director of City & Guilds and ILM, called on the government to provide greater support to workers over the age of 25 to stem unemployment. While he welcomed the interventions the government had put in place to support young workers, he said there had been few initiatives to “support all of the other workers that [would] also be badly impacted” by the pandemic.
“As the end of the furlough scheme approaches, we need to ensure that we’re taking all the steps possible to help ensure that all of those most impacted by the pandemic have opportunities available to them, whether via employment, apprenticeships, careers advice or training and reskilling,” Phillips said.
The ONS data came as research by the Institute for Employment Studies (IES) found the number of redundancies planned in the UK would exceed anything seen in “at least a generation”. The analysis found employers notified the government of nearly 380,000 staff at risk of redundancy between May and July 2020. This was double the peak reached during the last recession, when 180,000 staff were at risk of being made redundant between January and March 2009.
The IES estimated that the UK was likely to see around 450,000 redundancies this autumn alone. It added this figure could exceed 735,000 if redundancy notifications continued to rise.