Employment down, unemployment essentially unchanged. Those were the latest findings, released August 11th by the Office for National Statistics, in a nutshell. Except they don’t give the whole story. The fallout from Covid-19 is changing so rapidly, figures from April-June don’t paint a picture of what the jobs market is currently like. With the furlough scheme now being wound down, it won’t be until the scheme fully ends in October that the full force of Covid on the economy will be felt. The disparity between employment and unemployment figures is telling, however. We look into what this means for the economy now and in the months to come and what affect this will have on recruitment.
The employment/unemployment gap
The headline figures are that employment is down by 220,000 from March, with early indicators for July suggesting that it could now be down by as much as 730,000, the largest quarterly decrease since the 2009 recession. Why then is unemployment at just 3.9%, a low figure that has hardly changed from the previous year? The answer lies in the definition of ‘unemployed’ set by the International Labour Organisation.
Unemployed people are defined as those “without a job, have been actively seeking work in the past four weeks and are available to start work in the next two weeks.” The key point here is “actively seeking work”. Many of those who were made redundant at the start of lockdown have simply given up looking after failing to find another position thanks to significantly low vacancies and high numbers of candidates. These are classed as ‘economically inactive’ rather than ‘unemployed’ and this group has risen by 1.03 million to 2.13 million. Some have had to look after children who were left without schooling or childcare during lockdown, others have decided to take early retirement and some are considering retraining. Many more simply do not believe the jobs are available.
What is perhaps most telling is the Claimant Count (the number claiming benefits), which reached 2.7 million in July, an increase of 116.8% from March. As has been much reported, it is young people who are still being impacted the most, with nearly one in seven 18-24-year-olds on the Claimant Count. The number of those working on zero-hour contracts has also sharply risen to a record 1.05 million.
In other words, the unemployment figures don’t reveal the true state of the economy and the employment figures, though low, are set to drop even further as the furlough scheme winds down.
An economy locked down
The sharpest fall in the ONS figures is hours worked – the largest quarterly decrease in total weekly hours worked since records began in 1971 and the lowest level since 1994. This is undoubtedly due to the furlough scheme keeping workers in employment but without any actual work to do and is a stark indicator of the extent to which the economy froze during lockdown. Unsurprisingly, the accommodation and food service sectors saw the biggest annual fall in weekly hours worked.
What we know
We have been monitoring WaveTrackR data on a weekly basis since the start of lockdown and, during the months between March and June, the figures made for stark reading. At its lowest point, at the beginning of May, job posting was down a massive 86% on the pre-March average for 2020 and, despite a rise in redundancies, a dip in applications inevitably followed as a response to there being so few jobs on the market – there simply weren’t the jobs to apply for.
Since June, job posts have sluggishly risen and applications have skyrocketed (up 111% on the March-June average in the first week of August) as an increasing number have lost their jobs due to the furlough scheme winding down and businesses unable to cope after months of inactivity. The ONS shows similar findings, with vacancies rising by 10% in May to July from the record low seen in April to June. July shows an increase in vacancies to 470,000, a relatively low number but on par with the figures during the early stages of recovery from the last recession. There is a theory that this could be driven by smaller businesses, some of which have had to take on additional staff to meet Covid-19 guidelines, and start-ups created by entrepreneurial individuals who have been made redundant. So although the talent pool continues to grow and the market still doesn’t have the jobs to match, this could be a reason to be hopeful.
Dave Jenkins, CEO of Wave, believes we need to do everything we can to help support these small businesses.
“History has shown that huge growth can arise from the ashes of a recession, often via start-ups who think big and use the crisis as a catalyst for change. It was during the last financial crisis that the likes of WhatsApp, Uber, Instagram and Slack launched. These start-ups could be just the businesses we need to help get the economy moving again.”
What the end of furlough could mean
Whilst the government-backed furlough scheme has undoubtedly held together the economy for the past 4 months, with a huge number of businesses taking advantage of the support, its end in October will mark true insight into the full effect of the pandemic on the jobs market and the economy. ONS figures show that approximately 7.5 million people were estimated to be temporarily away from work in June, with a large number of those on furlough. Without the furlough scheme, many would have been made redundant, leading to a very different set of unemployment figures. Bloomberg economist Dan Hanson believes that the unemployment rate will have more than doubled to around the 8.5% mark by the end of the year.
Redundancies have already reached 134,000, an increase of 30,000 on the year and 27,000 on the quarter – a seven-year high. Once the government is no longer subsidising wages will that number soar?
Job creation crucial
The worries over what the end of the furlough scheme could mean for employment levels have led many to call for longer-term government stimulus to create jobs. Minister for Employment Mims Davies responded to the fall in employment numbers by insisting the government is committed to supporting the jobs market. September will see the launch of the Kickstart scheme to create thousands of jobs for young people and initiatives such as the Eat Out to Help Out scheme and stamp duty cuts all help boost the economy but will they be enough?
Rishi Sunak has made it clear that the government can’t protect every job but there is “a clear plan to protect, support and create jobs to ensure that nobody is left without hope.” The TUC General Secretary Frances O’Grady called for the government to extend the furlough scheme for those industries that still can’t reopen but that is looking extremely unlikely and would, in some ways, be counterproductive by halting movement within the recruitment industry. Yael Selfin, chief economist at KPMG, believes the government needs to help those made redundant retrain for jobs in different sectors.
Whatever it is, something definitely needs to be done to support those back in the jobs market – that ever-expanding talent pool – to find a job. We need those job postings to rise so that there are positions in which to place our candidates. And the economy needs it to survive.
