It’s now almost a year since Britain was first placed under Lockdown, and since then we’ve been focused on little else. As state and society have sought to mitigate the risk of Covid-19, the labour market has seen unprecedented disruption. Between March and December last year, the government paid for 1.53bn working days not to be performed. Swathes of British business have spent much of the past year shuttered, with their premises unattended. The fall in GDP is estimated by the ONS to be 9.9 per cent across 2020, twice the rate lost in 2009, amidst the global financial crisis.
However, with the government’s roadmap setting out a path from restrictive lockdown to being back to near-normal by the end of June, we can begin to look at prospects for recovery — assessing the damage done, and the progress on recovery made so far.
The damage done
There is lots of bad news, but the picture is less bleak than it was last summer, and far less than we thought it might have been. Unemployment has risen to 5.2% — up from 3.8% a year before, but still only at levels seen five years ago, when the labour market was considered to be in robust health. Part-time employment is 7% down, self-employment 13% down on a year before, but full-time employment — the largest category — is broadly stable.
Arts, entertainment and recreation jobs are down 10%, and the accommodation and food services sector down 5% — but many other industries are broadly stable in jobs, and some increased. That pattern reflects those industries most affected by lockdown restrictions: theatres, hotels, restaurants and pubs rely on their customers being physically present and so even in the period of lightest restrictions, were a great distance from normal conditions.
Given how tough restrictions have been, it’s an achievement that more jobs haven’t been lost. That reflects a significant success from the option to furlough through the Coronavirus Job Retention Scheme. But it also reflects a determination of some industries — especially manufacturing or construction — to find socially distanced ways to get back to work.
The result has been that while there remains a significant share of the workforce furloughed or who have become unemployed, most people have been working since the first lockdown. That’s also meant that, in aggregate if not for all, British household finances are in relatively healthy form, accumulating money which can be spent as the economy reopens — creating the “coiled spring” the Bank of England has spoken of as a cause of confidence for the recovery.
While unemployment has risen, the conditions driving that rise are showing signs of abating. Through the first months of the Covid-19 crisis, the number of vacancies reported by businesses fell by half and the number of redundancies expanded more sharply than in the financial crisis. In the last few months, both the vacancy rate and the redundancy rate have started falling back: while unemployment is likely to continue to increase while they remain elevated, continued progress on these points should limit that increase.
Through the Covid-19 crisis, our job postings data have become an invaluable source of real-time intelligence on the trajectory of the labour market. Job postings’ frequency have allowed direct monitoring on the sharp-end of employers’ demands. Here we set out (purple line) the volume of new postings across the last year, compared to the same time a year before. We also add the daily furlough total, as a percentage of the peak in the summer (green line). Job postings take us right to a week or so ago here, while furlough data was available only to the end of December.
The key headlines are that the initial shock in April to June has taken a long while to recover, but has not been replicated with the new lockdown in 2021. In the initial lockdown, half of new job advertisements disappeared for most of the quarter, while in November and December last year — even with partial lockdown in place — new job advertisements appeared in similar volumes to those seen in 2019. The arrival of the new lockdown in the New Year has seen new postings fall by around a quarter compared to the same time last year – certainly disruptive, but not nearly as much as in the initial lockdown.
Winners and losers
That different experience between the first lockdown and the most recent months can be further explored by looking at its effects on different types of jobs. In the final chart, we plot each of the 25 sub-major groups of the ONS Standard Occupational Classification in terms of the rate of change year-on-year in April-June 2020 (horizontal axis) and in November 2020-January 2021 (vertical axis). We then split the chart into four quadrants according to the overall change in job postings in each period: -47% in April-June and -15% in November-January.
The resulting quadrants help us to explore how the changes over the last year have affected different types of job role differently. In the top-right are those which saw smaller-than-average reductions in the initial period and have seen growth or little contraction on the latest data. These are health and care roles, professional roles, as well as the protective services – a combination of key workers and those who could work from home. On the bottom-left are those with the opposite experience: hit harder in the first lockdown and continuing to contract since then: these are primarily retail, customer-facing roles and those in leisure, travel and personal services — but also a number of middle-skill and administrative roles too.
Perhaps the most interesting groups are those at top-left: hit hard in the first lockdown, but by November-January seeing stability or growth compared to a year before. And this quadrant is dominated by roles in building and manufacturing. All of them saw a recruitment demand fall of 50 per cent or more in the initial lockdown, but all are back to normal or – for skilled construction and building trades – above normal level, perhaps reflecting a need to catch up on lost time. (It should be added that one consequence of the crisis has been a 13 per cent fall in foreign national employment, heavily concentrated in those from EU accession states, which may also have affected the building trades.)
Full recovery when?
If the government’s roadmap goes to plan, by the end of June all lockdown restrictions should be lifted. Emsi has no expertise on how likely that is, but if it does occur, then it will provide the setting for the partial recovery we can already see to gather pace and spread to the hardest hit sectors, such as hotels, pubs and restaurants, arts and entertainment.
The questions then become about how quickly that recovery will be, and how soon it will close off a worsening of labour market disruption. On the latest data, unemployment is at 5.2 per cent — while it certainly now seems unlikely to move towards 10% as was once feared, it seems like to rise somewhat more, as furlough ends and while vacancies take time to return to normal levels. Equally, the lifting of lockdown restrictions does not mean that all businesses will return to full operation: some will have been damaged by financial losses and some will have lost customers, as more of us work from home or shop online. At the same time, Britain’s rapid progress on vaccinations may mean that we move fully into economic recovery ahead of some of our export markets — and international travel restrictions mean tourism within the UK will remain constrained.
But that all said, there are reasons to be optimistic that recovery can move quickly. The return to relatively normal levels of recruitment across manufacturing and construction sectors suggest that recovery can be rapid when circumstances allow. Demand for consumer-facing services is primarily dependent upon people having jobs and income – and as most other sectors have sustained or return to normal operation, this demand does exist. In fact, Bank of England data suggests household finances are in good shape for many people, and so well prepared for demand to return. Within the labour market, the sudden loss of so many foreign national workers will mean some employers recruiting from a smaller pool, making the labour market much tighter even as some people have unfortunately lost their jobs.
As with the government’s roadmap, only time will tell. For our part, Emsi will continue to monitor and share with our customers our take on how the labour market is changing – although hopefully moving in a much more positive direction than that we saw in 2020.
Our recent webinar contains even more data and analysis about the effects of the last year, and the likely path to recovery. You can watch this below, and sign up to our webinar on 18th March — Putting Skills at the Heart of Economic Recovery in Your Region — by clicking the button.