Lockdown labour market deep freeze eases – but the big redundancies test is yet to come

The deep impact of lockdown restrictions eased slightly in May as some employees returned from furlough and self-employed workers increased their hours. But the true scale of Britain’s jobs crisis won’t be known until the Government’s Job Retention Scheme is phased out in the months ahead, the Resolution Foundation said today (Thursday) in response to the latest ONS labour market statistics.

Today’s data shows the scale of the labour market shock caused by the lockdown phase of this crisis: the number of employees fell by 650,000 between March and June; the number of vacancies fell by 423,000 in the same period; and, the average number of hours worked fell by a fifth between the four weeks before lockdown began and May.

However, there are signs that the impact of lockdown restrictions on the labour market levelled off in May. The Foundation notes that average hours worked increased by 1.5 hours a week between late April and the end of May (particularly among self-employed workers), the number of people temporarily away from work fell by 2.4 million, and vacancies increased slightly from 316,000 to 333,000 between May and June.

But while the initial jobs shock has eased, the Foundation warns that far bigger challenges await this autumn as the Government’s Job Retention Scheme is phased out.

With a recent business survey suggesting that almost one-in-three firms could lay off workers in the next few months, there is a huge risk that many furloughed workers – particularly those working in hard-hit social sectors like hospitality – will lose their jobs altogether.

The Foundation says the Chancellor should announce further jobs support for hard-hit sectors, as his one-size-fits-all Job Retention Bonus risks being too small and too temporary when it comes to the workers and firms that really need help.

Finally, the Foundation notes that the UK’s headline unemployment measures are completely failing to describe the state of labour market. The headline unemployment measure barely moved in the three months to May, while the claimant count actually fell in June after huge (and now revised) increases in previous months. Far better indicators are needed to show the public – and policy makers – what’s actually happening to people’s livelihoods, says the Foundation.

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

“The recent lockdown caused a profound economic shock, with millions of workers furloughed or seeing their hours of work cut. But the easing of restrictions in May and June appears to be levelling off this stage of the labour market crisis. Hours worked and vacancy rates recovered slightly from record falls, and some workers returned to work from furlough.

“But while the initial shock is levelling off, that doesn’t mean the jobs market is in recovery. The next big test of this crisis – on rising redundancies and unemployment – is still to come as the furlough scheme that has supported over nine million jobs is phased out.

“The Chancellor should deliver further support in the hardest hit parts of the labour market to prevent the rise in unemployment being large and long lasting.”