Trouble ahead? Early warning signs for the labour market

by Stephen Evans


26 03 2020


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Coronavirus is, first and foremost, a public health crisis. It is also having a profound impact on the labour market, both directly and also indirectly through the measures rightly being taken to protect health. The Government has introduced lots of measures to try and protect businesses and people’s jobs and incomes. But these will be unable to fully protect everyone. Early warning signs of the scale of challenge people face are, therefore, important in assessing the impact of the policy response and need for any further action.

Some of these are evident. The Department for Work and Pensions has confirmed there have been almost 500,000 Universal Credit claims in the last nine days – about five times the normal levels. Citizens Advice has highlighted a spike in visits to the sections of its website which provide guidance on Universal Credit, debt management and so on.

Some surveys have suggested that hundreds of thousands of people may have already lost their jobs. A recent YouGov survey found that of those who said they were employed before the crisis hit, nearly one in ten said they had lost their jobs, with nearly one in five saying they had had their incomes reduced.

Coronavirus is a global pandemic, with a global economic impact. It’s possible to see the potential scale by looking at other countries with more timely reporting of employment data. The signs here are startling – the unemployment rate in Norway soared 350% in a week, to the highest level since the Second World War.

We have been looking at Google trends data, which show how many people are searching for particular terms, to see if this can provide further insight. A few caveats to start:

  1. This data shows the number of searches relative to searches for the same term previously – it is a relative measure rather than showing the absolute number of searches for that term
  2. It is dependent on the search terms used. People can use a range of terms to get the same information. We’ve tried to use a few different terms in order to mitigate any bias that may arise from just focusing on one specific term
  3. People may use other search engines (though let’s be honest, virtually all of us use Google!) or go to websites direct rather than via a search engine. The data cannot be broken down to local level either, so this is a UK picture.
  4. We’ve looked back over the last week, and also to 2008. Of course, the use of the internet and internet habits were very different back then (though it wasn’t exactly an internet or Google free zone). Comparisons over a longer period of time need to be approached with a degree of caution.

There are reasons that these trends are not perfect measures and do not show the whole picture. They need to be seen alongside a range of other measures. But they are, perhaps, an additional indicator of what is happening in real time.

Signs of job loss

Searches for ‘lost my job’ are five times higher than at any point since 2008 (the left hand graph, bearing in mind the caveat about comparisons over time). Over the last week (the right hand graph), searches peaked around Friday 20 March. This is consistent with the announcement of much stricter restrictions on business, including encouraging social distancing and the expected and immediate impact on hospitality and retail industries in particular. It is also consistent with the sharp spike in Universal Credit claims reported by the DWP.

Speaking of which, searches for Universal Credit have followed a similar pattern. It is not a surprise that searches (left hand graph) for Universal Credit have risen gradually over recent years given the benefit was introduced in 2011 and has been rolling out since. But the sharp spike in March – a 25% rise on levels seen in the previous 6 months – is clear. In the last week (right hand graph), the biggest spike was on 20 March. This coincides, as above, with stricter restrictions on business activity and the Chancellor’s announcement of financial support for people (including through Universal Credit).

Signs of household finance strain

Job loss clearly puts a large strain on the finances of a household. So too does a reduction in recruitment and any reduction in hours worked too.

Searches for ‘can’t pay bills’ have sharply spiked in March and are five times higher than ‘usual’ levels (left hand chart), with the last week seeing peaks around the announcement of restrictions on trading and then around a fuller ‘lockdown’ (23.3).

A similar pattern is seen for searches of ‘can’t pay rent’, with renters a group with less help provided than others so far.

All told, this data is consistent with other data showing a sharp shock to our economy and immediate impacts on employment and household incomes.

The Government has done many of the right things to protect businesses, jobs and incomes in the short term. But given the scale of the crisis – and the early warning signs we have highlighted – we will inevitably see a significant rise in unemployment. In the medium-term, when the virus is beaten and the economy is able to get going again, we will need to see a national effort to tackle unemployment, and to help people back into decent, fulfilling work.