Covid-19· Labour market Five things we’ve learned from today’s labour market data 19 May 2020 by Hannah Slaughter and Nye Cominetti Hannah Slaughter Nye Cominetti This morning the Office for National Statistics (ONS) published the first major set of labour market data that covers the lockdown period, with data from April on vacancies, claimant unemployment, and employee jobs. Of course, the scale of the crisis has been clear for some time in other data – including Universal Credit claims and the eight million jobs supported by the Job Retention Scheme (JRS). But this is the first time we’re seeing the effects of the crisis in the official labour market release, which gives rich data on pay and employment. Here are five key takeaways from it. PAYE employment went down in April Back in December the ONS started publishing ‘real-time information’ (RTI) on pay and jobs from HM Revenue and Customs’ (HMRC’s) PAYE records, which give data on pay and employment with less of a lag than the traditional surveys. Today’s RTI data shows a 457,000 (1.6 per cent) drop in the number of paid employees in April compared to March. Employees will remain in this data when furloughed under the retention scheme, so it provides an early indicator of the unemployment shock that’s already upon us. Vacancies halved between March and April Single-month vacancy data for April (which was collected on 3 April) shows a very significant drop off: total vacancies were less half the level in March (350,000, down from 750,000). The drop off in vacancies was already clear from non-official datasets such as online jobs websites, but it is still shocking to see a fall of this scale. Another timely (though less universal) source of vacancies data has been the postings on the Department for Work and Pensions’ (DWP’s) ‘Find a Job’ website, which we have been collecting throughout the crisis. As well as indicating the scale of the drop off (postings fell by more than half from the beginning to the end of March), the data has also shown the greater effects in the worst-affected sectors. The majority of remaining jobs advertised on that site are now in the health or (food) retail and distribution sectors. Today’s official ONS vacancies data paints a similar picture: vacancies in hospitality, retail and motor trades fell by around 80 per cent between March and April. The one positive lesson we can take from the DWP’s more timely data is that vacancies seem to have bottomed out – they actually recovered somewhat at the end of April. The low point was at the beginning of April, exactly when the official vacancies data published by the ONS today was collected. So, hopefully, this may be as bad as it gets for total vacancies. The claimant count has passed two million A third indicator of big shifts in the labour market is the number of people claiming unemployment-related benefits, which increased by 850,000 in early April compared to early March. Unlike the employee data above this figure will include the self-employed as well as some very low earners. The rise takes the claimant count to 2.1 million, around a third higher than the levels seen following the financial crisis. Although timelier data shows that the overall numbers of new Universal Credit claims (not just unemployment-related) are now falling, they remain well above the pre-crisis average. It’s likely that we’ll see some of this increase translate into higher unemployment over the next few months of data. But official employment data hasn’t moved yet Despite these early indicators of the shock to the labour market, we are yet to see changes to the headline employment statistics. The main stories are in hours reductions – the average employee was worked over eight fewer hours in the last week of March compared to a year earlier – and in temporary absences from work, which hit 7.4 million at the end of March. The headline employment rate in March reached a record high – 76.8 per cent in the single-month figure – while the unemployment rate was near record lows, at just 3.7 per cent (3.9 per cent on the preferred three-month measure). But as we can see from the real-time data for April, this strong labour market is not set to last as the data catches up with the lockdown. We can expect big increases in unemployment to show up in next month’s data. And the crisis is yet to show up in earnings statistics Similarly, although we saw a small decrease in pay growth in the latest month of data (in line with weakening wage growth since the beginning of the year), we didn’t see big changes in pay in today’s headline figures. However, there is some evidence of falls in pay in the more experimental, though timelier, RTI data, which implies a 2 per cent annual pay fall in April, after adjusting for inflation. We can expect pay falls to show up in next month’s official data. This will be driven by many workers on the JRS receiving 80 per cent of their previous salary (the amount covered by the Government), and will only be partly offset by compositional effects (those previously in lower-paid work are more likely to lose their jobs). While some of this will be reversed as workers move back off the JRS later in the year, there’s a risk that without intervention, higher unemployment and a looser labour market could mean a repeat of the real pay falls that followed the financial crisis. Conclusion Today’s data starts to show the scale of the labour market crisis, even before the full impact shows up in official statistics. And it’s increasingly clear that the JRS has been crucial in stemming job losses, with the latest HMRC data showing that eight million workers are now supported by the scheme. Policy makers will need keep a close eye on the data, and on who is most affected, as they think about how to support the labour market through the immediate crisis phase and into the recovery period.