Record job moves has helped prevent a post-furlough labour market shock

The end of the furlough scheme in October has not sparked fresh a labour market shock as many had feared, with payrolled employment continuing to rise, vacancy levels hitting a fresh high, and seven-in-eight recently furloughed workers returning to work, the Resolution Foundation said in response to the latest ONS data today (Tuesday).

The Foundation notes that the backdrop to the end of the furlough scheme on 30 September was rising employment (up to 75.4 per cent), falling unemployment (down to 4.3 per cent) and a record number of people moving into new jobs – driven by resignations rather than redundancies. In September, unemployment – on the volatile single-month measure – was 3.9 per cent, below the level of February 2020.

The early signs for the UK’s post-furlough labour market are encouraging too, with payrolled employment rising by 160,000 in October and vacancy levels hitting a record 1.17 million.

These vacancies are being filled at record rates, with the average time to fill a vacancy equalling its pre-crisis record of 1.5 months. This shows that record vacancies are being driven by the economy reopening, rather than it being impossible to hire staff as some have suggested, says the Foundation.

These encouraging early indicators match with the Foundation’s own survey of 6,060 workers in mid-October, which found that 88 per cent of employees who were furloughed in late September were employed in October.

The Foundation notes however that while the UK’s job market is looking resilient this autumn, the outlook for pay packets is far more troubling.

While average weekly earnings growth was 4.9 per cent in July-September, this was still distorted by the impact of the pandemic. The ONS estimates that underlying pay growth could be as low as 3.4 per cent, implying a real-terms fall with inflation expected to climb towards 4 per cent in October.

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

“The furlough scheme has kept a lid on unemployment throughout the pandemic but many have feared that its closure on 30 September would spark a fresh labour market shock.

“But early indications are that the UK’s jobs market has remained resilient, with record vacancies and job moves, and withstood the withdrawal of emergency support well.

“But while unemployment is unlikely to be a problem this winter, pay may well be. The economy needs ‘goldilocks’ pay growth – fast enough to protect living standards, but not so fast as to generate excessive inflation.”

Notes to Editors