Job Market Concerns

Latest Office for National Statistics (ONS) figures underline the crisis facing the jobs market now we are exiting lockdown. With vacancies understandably falling to a record low in May, the claimant count soaring and over nine million jobs having been furloughed at some point since March, the signs point to a labour market in some distress with millions of workers’ wages being subsidised by government.

The ONS vacancies series shows a -60% drop since February, to circa 320,000 in May on the single month measure. That number is also reflected in the decline being reported by Indeed which they report is running -61% below last year’s trend as of 12 June. The graph underpins what most of us intuitively would expect but of course the hard facts are shocking to see and point to hard times to follow in the short to medium term.

Official unemployment remains relatively low but the reality is that the unemployment numbers are being held down by the large numbers of workers placed on furlough. Apparently, benefit claims and hours worked have shown some impact from Covid-19. The claimant count has jumped to 2.8 million, up 1.6 million since March, though this is not a true measure of unemployment, as it also includes some people on supplemented low pay or hours and who are eligible for unemployment-related benefits and are therefore also reported as claimants.

April saw a record 8.9% year-over-year (y/y) fall in the hours worked, with accommodation and food services (restaurants etc) seeing the biggest fall in hours. Fewer hours and pay cuts among those on furlough translated into lower average weekly pay. Total pay growth for employees dropped 1.3 percentage points to 1.0% y/y in the three months to April, with real terms pay turning negative at – 0.3% y/y.

The big question is what happens next. With government wage subsidies set to taper down over the summer and autumn, further redundancy announcements are expected following the slew of layoffs that have already been announced and some of the larger retail and restaurant chains reporting financial difficulty. This will lead to a large increase in unemployment at a time when vacancies have dropped to a record low. The tight labour market in these sectors is over but there will also be a knock-on effect in most if not every industry as a result.