August 2020

This briefing sets out analysis of ONS labour market statistics released on morning of 11th August 2020. The data cover the number of people claiming benefits up to July 2020, and employment and unemployment figures for the period April to June 2020.

Stephen Evans, chief executive of Learning and Work Institute
There are now 730,000 fewer people in payroll employment than at the start of the crisis, and 3.4 million people who are out of work and who want a job. While the number of vacancies has re-bounded slightly, there remain fewer job opportunities than at any point seen in the last recession. There are also signs of worse to come. The Coronavirus Job Retention Scheme has helped prevent millions of job losses. But with the scheme coming to an end in October, we risk seeing a second wave of unemployment, with perhaps more than one million furloughed workers unable to return to their jobs. The Government should look again at extending support for jobs in hard-hit sectors, and it must ramp-up employment and training support for those who may lose their jobs.
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Largest decline in employment in a decade and 3.4 million people out of work and wanting a job

The headline employment level has decreased by 220,000 on the quarter, the largest decrease since the 2009 financial crisis.

Figure 1: Employment total from ONS and HMRC data


However, throughout the pandemic, the headline employment and unemployment figures have not fully reflected the scale of the crisis in the labour market. This is partly due to the success of the Coronavirus Job Retention Scheme in protecting jobs, and partly due to many people who are out of work not being classed as ‘unemployed’, as they have been discouraged from seeking work by the sharp decline in vacancies, or unable to start work because of caring responsibilities.

It is possible to see the scale of the impact through looking at the number of people who are out of work but want a job. Figure 2 shows that while there has been only a small increase in the headline rate of unemployment, there has been a much steeper increase in the number who are economically inactive but who would like a job. Taken together, there are now 3.4 million people who are out of work but would like a job.

Figure 2: The number of people out of work and wanting a job has risen


There is little sign of green shoots

The best measure of activity in the labour market in the current crisis is the total number of hours worked across the economy. With the gradual easing of lockdown, the re-opening of the economy and the return of some furloughed workers, we might have hoped to see an increase in the total number of hours worked. However, as figure 3 below shows, the number of hours worked per week at the end of June remained 19% below pre-crisis levels.

Figure 3: The number of hours worked per week has increased but remains well below pre-crisis levels


Another place to look for green shoots would be in the job vacancy data. Following the lockdown, the number of vacancies dropped to below half of the 2019 average. ONS analysis suggests that rather than a large increase in job losses, it was this decline in vacancies and hiring that has led to the sharp decline in employment we have seen. There has been a gradual increase as the lockdown has eased, but the number of vacancies at the end of July remained at just 53% of pre-crisis levels.

Figure 4: There are half as many vacancies as before the crisis


With up to 5.5 million workers still on furlough, the end of the scheme risks triggering a second wave of unemployment

The Coronavirus Job Retention Scheme has helped protect jobs and incomes, limiting the rise in unemployment. However, the end of the scheme could lead to hundreds of thousands of redundancies and a ‘second wave’ of unemployment.

HMRC data show that 9.4 million jobs have been furloughed since the introduction of the scheme in April. Many of these workers will have returned to work already or left their jobs, but HMRC has not provided data on how many workers remain furloughed.

The best proxy to understand how many workers remain on furlough is the number of employees who are temporarily away from work. Today’s labour market statistics show 7.7 million workers are temporarily away from their work. This figure is 5.5 million higher than this time last year, suggesting that over 5 million workers were still furloughed at the end of June.

There are concerns that a large proportion of furloughed workers may be unable to return to their previous jobs. Recent OBR forecasts were based on an estimate that 15% of furloughed workers would become unemployed. This would mean 1.4 million furloughed workers losing their jobs.

Figure 5 – 7.7 million people were temporarily away from work at the end of June


Young people leaving education this summer face a very challenging labour market

Hundreds of thousands of young people will receive their A Level results on Thursday, and hundreds of thousands more have recently completed vocational courses and higher education this summer.

Young people completing their education this year face a very challenging labour market, with the number of vacancies having plunged, and far greater competition for job opportunities.

Claimant unemployment for young people has increased rapidly since the start of the crisis. The number of people aged 16 – 24 claiming unemployment-related benefits has increased by 122% – more than for any other age group. In July there were 531,300 young people claiming unemployment related benefits, the highest figure since September 1996.

Preventing a rise in long-term youth unemployment has been a key priority in the government’s response to the crisis. In his financial statement last month, the Chancellor announced a £2billion Kickstart Scheme, which will create short term job opportunities for young people, as well as additional investment to create traineeships and apprenticeships. Further details on the Kickstart Scheme are expected this month, ahead of the first jobs going live in September.

Figure 6: Youth claimant unemployment has more than doubled


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