Jobs, Jobs, Jobs: Evaluating the effects of the current economic crisis on the UK labour market

Posted 29.10.2020

Being embedded within Economic Development departments of upper tier local authorities, Building Better Opportunities Stakeholder Managers have the opportunity to develop and drive the social and economic inclusion agenda.

Whilst the national picture varies, the story of the initial stage of the coronavirus crisis is well understood. The impact of a huge lockdown-driven economic shock was focused on the labour market, with unprecedented falls in hours worked. But the impact on employment and household incomes was heavily mediated by an unprecedented policy response from the Government. Thanks to support for firms and the Job Retention Scheme (JRS), the number of people in work and getting paid fell by only 2.3 per cent by June, even though GDP had fallen by a quarter and hours worked by a fifth at their lowest point. The labour market shock was highly concentrated in certain sectors badly affected by lockdown or subsequent social distancing restrictions, with job losses or falls in earnings more common among the youngest and oldest workers, the low-paid, and among those on insecure employment contracts.

Over the summer, the economy began to open up, and GDP and total hours worked showed somewhat of a rebound. But it is now very clear that the UK is very far from following the path of a V-shaped recovery, with GDP growth slowing in August and output remaining 9 per cent below its pre-crisis level.

With that fall in output remaining much higher than even the peak to trough fall in the financial crisis, and the JRS coming to a close at the end of this month, it is inevitable that unemployment will rise in the months ahead to levels considerably higher than the rate of 4.5 percent recorded for June-August. Official forecasters vary but all point to a considerable rise: the Bank of England Jobs, jobs, jobs | Executive Summary Resolution Foundation 4 forecast (in August) a rate of 7.5 per cent by the end of 2020, and the Office for Budget Responsibility forecast (in July) a far more pessimistic 11.9 per cent.

The Autumn return of the virus and major restrictions on economic activity to try and contain it are key determinants of labour market outcomes in the months ahead. While the specific nature of revived restrictions varies across the UK, over half the country is now living under tighter restrictions than existed in the summer. These are having a material impact on hospitality and leisure businesses in particular, leading the Chancellor in recent days to increase the generosity to firms of the Job Support Scheme (JSS), which will replace the JRS at the start of November. But while it is clear that difficult times lie ahead for workers and the labour market, policy makers have to act despite the uncertainty of how the virus and the economy will develop.   And they must do so with big gaps in our understanding, in part because official data is often lagging developments in such a fast-moving crisis.

The Resolution Foundation’s Jobs, Jobs, Jobs report aims to address some of those gaps, and to help us all – including policy makers to navigate this uncertainty.

The report analyses how the labour market situation has evolved from when the pandemic first hit through to this autumn and provides more detail on the nature of the shock than is possible from official statistics.

In particular, it brings to the fore changes over time. In doing so, it highlights which groups have struggled the most, who is at risk as the JRS is replaced by the JSS in a few days’ time, and what the prospects for the future are. The core of the analysis is based on a survey of 6,061 adults aged 18-65, which took place on 17th – 22nd September. Unemployment has started to rise in official data, and the survey suggests further rises have already happened (extract Jobs Jobs/ Resolution Foundation report)

The Resolution Foundation is an independent think-tank focused on improving living standards for those on low to middle incomes.

They work across a wide range of economic and social policy areas, combining their core purpose with a commitment to analytical rigour. These twin pillars of rigour and purpose underpin everything they do, making them a leading UK authority on securing widely-shared economic growth.

The Foundation’s established work programme focuses on incomes, inequality and poverty; jobs, skills and pay; housing; wealth and assets; tax and welfare; public spending and the shape of the state, and economic growth.


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