A huge shock is unfolding in the UK labour market. Official figures published on Tuesday show that almost three million people are claiming unemployment benefits; while more than 600,000 have dropped out of payroll employment and more than 100,000 out of self-employment since the start of the lockdown.
Pay has fallen in real terms and hiring has collapsed, with vacancy numbers at an all-time low in May. Yet the Office for National Statistics' headline measure of unemployment remains unchanged, averaging just 3.9% over the three months to April €” much better than expected and clearly at odds with the scale of the slump in economic activity. Here are the main conclusions that can be drawn from the data:
- The job retention scheme has been crucial - The job retention programme is the main reason employment has not fallen much more sharply as a result of the crisis.
- Employers have already cut jobs - The number of people claiming out of work benefits climbed to 2.8m in May - a jump of more than 1.5m since March€‹ - suggesting that unemployment is already approaching levels last seen in the 1980s recession.
- Unemployment looks likely to worsen - The collapse in hiring €” with vacancies down by a record 60 per cent between March and May €” is one of the most worrying signs in the data, even if the ONS's more timely tracking of online job adverts suggest that hiring has started to pick up slightly since the start of June.
- No clear north-south divide in pattern of job losses - Clusters of unemployment are now emerging in more prosperous areas of southern England, especially in areas that could be exposed to a long term structural decline in sectors such as aviation and car making.
About the Author: Glen Callow
