Employment falls but furlough and lockdown combined see job market enter 2021 in deep freeze

A difficult end to 2020 saw employment fall by 148,000, but the Job Retention Scheme has prevented an 7.9 per cent fall in hours worked feeding through into further job losses in early 2021, the Resolution Foundation said (today) in response to the latest labour market statistics.

The employment rate fell by 0.3 per cent to 75.0 per cent in the three months to January. On the anniversary of the first lockdown, the fact that young people have borne the brunt of the crisis throughout the past year was reinforced with data showing that workers aged 24 and under accounted for almost two-thirds of the 693,000 fall in payrolled employment since the crisis began. Payrolled employment among those aged 24 and under was down 11 per cent on pre-crisis levels, compared to a 1 per cent fall across all other age groups.

Employment falls relate to the marked deterioration at the end of 2020, with more recent data showing small signs of the labour market improving in early 2021. Payroll employment rose by 68,000 in February. The Job Retention Scheme (JRS), currently estimated to be supporting around 4.7 million employees, has prevented the latest lockdown feeding through into more job loses – despite total hours worked falling by 7.9 per cent compared to pre-crisis levels.

The importance of the furlough scheme was reinforced by ongoing signs that people are losing their jobs and that there are fewer jobs to find. Vacancies remain down a quarter and redundancies three times above pre-crisis norms.

The difficulties of producing accurate labour market data during the pandemic were also highlighted by earnings and migrant workers data. The annual rate of pay growth hit 4.2 per cent in the three months to January, its highest for almost two decades. But half of this relates to average pay being boosted by low earners disproportionately losing work. Foundation analysis shows that in fact half of workers experienced a real-terms pay cut last year.

Payroll data confirm a fall in the number of migrants in work, but consistent with recent Resolution Foundation analysis, this fall is much smaller than some recent estimates and concentrated among those of EU nationality.

Nye Cominetti, Senior Economist at the Resolution Foundation, said:

“Employment fell at the end of 2020 as the Autumn redundancies spike worked its way through, but the furlough scheme has protected workers from the renewed effects of lockdown in early 2021.

“Young people continue to bear the brunt of the crisis, with payrolled employment among those aged 24 and under down 11 per cent on pre-crisis levels, compared to a 1 per cent fall across all other age groups.

“On the anniversary of the first lockdown, the jobs market is largely on ice as we await a proper recovery to get underway and the phasing out of the Job Retention Scheme to reveal the extent of lasting labour market damage.”