March 2021
Stephen Evans, chief executive of Learning and Work Institute, said:
Unemployment has risen again, but could have been 2.5 million higher without the furlough scheme given how much the economy shrank. However, the pandemic has had stark and unequal impacts, with young people and areas with high unemployment before the pandemic hardest hit. We’ll be living with its effects for years to come, with youth long-term unemployment already up by one third.
As vaccine success allows us to look ahead, we should aim for better than a return to business as usual. That means making sure every young person has a job or training offer, including the 500,000 set to leave full-time education this summer, tackling the rise in long-term unemployment, and renewing our focus on the quality of work.
Unemployment is stabilising at higher levels than before the pandemic, with the furlough scheme preventing a sharper rise
The latest labour market statistics show another small increase in unemployment, from 4.9% in August to October 2020 to 5.0% in November to January 2021. Last month’s figure was 5.1%, so there was a small fall between October to December and November to January.
The claimant count, which measures the number of people claiming unemployment-related benefits rose from 7.2% in January to 7.5% in February 2021. The number of hours worked decreased slightly to 92% of the February 2020 level (using experimental weekly data). This reflects the lockdown in January, with the furlough scheme meaning this has affected hours worked more than employment.
Unemployment is likely to increase during 2021 as the Coronavirus Job Retention Scheme (CJRS) ends in September. There were still 3.2 million workers who were fully furloughed and working no hours at the end of January, and at least some of these are likely to lose their jobs.
However, the peak in unemployment looks likely to be lower and later than previously expected. Earlier this month, the Office for Budget Responsibility revised their forecasts for unemployment down to a peak of 6.5% (2.2 million), due largely to the success of the vaccine roll-out and the extension of the Coronavirus Job Retention Scheme. While a significant improvement on September’s forecast, this would still mean a further 500,000 people unemployed by the end of the year.
Long term unemployment continues to rise
The number of young people unemployed for 6 months or more has increased again. There were 184,000 long term unemployed young people in November to January 2021, up 20% on the previous quarter, and 39% on a year before.
The number of people over 25 unemployed for 12 months or more is broadly flat. Those who lost their jobs with the first lockdown are not yet in these figures, though by now they will have passed the 12-month threshold. There were 262,000 long term unemployed in November to January 2021, up 2% on the previous quarter, and 11% on a year before. The fall in the first lockdown was due to unemployed people not looking for work at that time (understandably) and so being counted as economically inactive.
The longer you are out of work, the more difficult it can be to return to employment, and long term unemployment can have a corrosive impact on health, mental health and wellbeing. Similar, albeit milder impacts, may also affect those who have been furloughed for a long period of time and subsequently lose their jobs.
Long-term unemployment is likely to rise sharply in the coming months. DWP are currently commissioning the Restart programme to support this group. However, there are concerns that in the first few months of the programme, there will be many more long term unemployed jobseekers than there are spaces on the programme.
The easing of the lockdown could allow some hard-hit sectors to recover, while other sectors have been expanding during the pandemic
The UK government and devolved administrations have set out a series of dates in the coming months for the easing of the lockdown. The gradual unlocking of the economy offers the opportunity for the recovery of sectors that have been hit hard by the pandemic.
The hospitality sector has been amongst the hardest hit. The latest data from Adzuna shows that in hospitality the number of vacancies remained at just 32% of pre-pandemic levels, compared to 93% for the economy as a whole. At the end of January, there were still 890,000 jobs in the accommodation and food sector that were fully furloughed. We will see the extent to which furloughed workers are brought back and hiring restarts in the coming months.
Some sectors have thrived, as patterns of consumption and demand have shifted in response to the unprecedented circumstances.
In the transport, logistics and warehouse sector, job vacancies were running at over double the February 2020 levels during the final months of 2020, and job vacancies in March were 59% higher than pre-pandemic levels reflecting the impact of increased online shopping.
A key question for the recovery will be the extent to which the changes we have seen during the pandemic were temporary or will last. At least part of the changes are likely to be sustained: one fifth (21%) and one third (33%) respectively expect to continue their increased usage of on-line shopping for groceries and other shopping after the pandemic. This increases the need for retraining and to support people to change sector.
Claimant maps
The recent uptick in the claimant rate is clear on this monthly change map, with the majority of areas seeing an increase in the claimant rate between January and February.
Every local authority (exc. City of London and South Ayrshire) has seen an increase in the last month – the largest in London (Barking and Dagenham, Hounslow, Redbridge) and other parts of the Greater South East (including Luton and Slough).
