February 2021

Stephen Evans, chief executive of Learning and Work Institute
Today’s labour market statistics show we’ll be living with the economic effects of the pandemic for years to come. Unemployment has increased above 5%, and there are 730,000 fewer people in payroll employment. The labour market is now stabilising with redundancies falling from their peak, but at higher levels of unemployment and with young people accounting for three fifths of the fall in employees. The Chancellor needs to extend the furlough scheme in next week’s Budget to match the easing of restrictions in the Prime Minister’s roadmap. Otherwise we risk a new wave of redundancies. He also needs to invest in job creation, help the 2.6 million people claiming unemployment-related benefits to find new work, and urgently introduce a Youth Guarantee of a job, apprenticeship or training offer. And after years of freezes in working-age benefits, it’s essential the Government makes the £20 increase in Universal Credit permanent to help households hard hit by the pandemic.
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Vacancies continue to recover but unemployment increases again

Latest vacancy data from the Adzuna job website shows that, following a stall in the recovery in November, there has been strong growth in vacancies in the last month. The number of vacancies is still one fifth below the average for 2019, but back to levels last seen in late March 2020 when the first lockdown was introduced.


However, unemployment has increased again. The unemployment rate is above 5% and at its highest since 2016. Employment has fallen by 600,000 on the LFS measure, and by more than 700,000 on the HMRC measure of payroll employees.


6 million people are temporarily away from work, with use of furlough increasing

A key decision for the Chancellor at the budget is the future of the Coronavirus Job Retention Scheme (CJRS). The CJRS – which has helped protect millions of jobs – is due to end at the end of April. But the Prime Minister’s roadmap suggests many businesses will still be closed or facing significant restrictions then.

New data from the labour force survey shows there were 4.6 million people temporarily away from work at the end of December. That is 2.1 million more than pre-pandemic, in line with the 2.3m workers HMRC show were fully furloughed then, matching the HMRC furlough data, and up one million since the end of November (again matching the HMRC rise of 1.4 million).

Unless the CJRS or other support are extended to match the easing of restrictions, there is a risk of a significant proportion of furloughed workers losing their jobs. If we are to minimise unnecessary job losses, support, including through the CJRS, must last as long as restrictions impact the economy.


Redundancies remain high, but look like they have peaked

Weekly data show the number of people made redundant fell during December, though redundancies remain high compared to pre-pandemic levels.


However, the falls during December combined with a fall in planned redundancies notified to the Insolvency Service through HR1 notices (which companies have to submit if they plan significant numbers of redundancies) suggests redundancy levels may have peaked. Of course, this depends on what happens to the economy and whether economic support matches the easing of restrictions.

Claimant count has risen fastest in London and in areas of higher pre-pandemic unemployment

One of the key themes of the upcoming budget will be how we can ‘level up’ prosperity after the pandemic. This is often framed as addressing regional inequalities between London and the rest of the country.

However, the latest data show that the capital has seen by far the largest employment impact from the pandemic. The proportion of working age adults claiming unemployment related benefits in London has risen 260%, up from 3.1% in March 2020 to 8.1% in January 2021. The rise of 5.0 percentage points compares to increases ranging from 2.3 percentage points in Northern Ireland, to 3.3 percentage points in both the North West and the West Midlands. The sharp rise in the claimant count in the capital is due in large part to the decline in both commuting and tourism, which have had a large impact on the economy of central London.

Looking at more local areas, the crisis has hit places with weaker pre-pandemic labour markets hardest. The claimant count has risen by an average 3.6 percentage points in the ten local authorities with the highest pre-pandemic unemployment, compared to 2.4 percentage points in the ten local authorities with the lowest pre-pandemic unemployment.

Change from March - website JAN

The impact on young people has been particularly stark

Young people account for around three fifths of the fall in employment since the start of the crisis. Their employment rates have fallen most sharply compared to other age groups, and there are now more than 500,000 18-24 year olds who are unemployed.


There is also a worrying rise in long-term unemployment among young people, and 16-17 year olds who are not in full-time education have seen particularly large falls in employment.


Six million people now on Universal Credit, doubled since March 2020, ahead of planned cut to benefit

The latest data show the number of people claiming Universal Credit increased to 6 million in January 2021, around 40% of whom are in work. This number has doubled since March 2020 on the eve of the pandemic.

Universal Credit claims have increased in every region of the UK, with the steepest increase in London where claims have shot up by 134%. Over 1 million Londoners are now claiming Universal Credit.

The Chancellor introduced a temporary £20 increase in Universal Credit in March 2020 to support those who lost their jobs or had reduced incomes as a result of the pandemic. The increase is currently due to be removed at the end of March 2021.



Changes in claimant rate

  • Claimant rate remains over 5 percentage points higher than pre-pandemic in large parts of London – and over 7 percentage point in Haringey and Newham
  • Rates are starting to fall in outer London e.g. Barnet and Barking and Dagenham – although some parts of Enfield and Haringey in North London have seen an increase
  • Coastal areas (e.g. Great Yarmouth, Scarborough, Blackpool) have seen increases in last month . This is likely to be due to the impact of it being off season as well as the third lockdown
Change from March - website JAN
Claimant count by LA - JAN update
Claimant count by LA - monthly change JAN
Monthly change - website JAN
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