Wellian Weekly 19.10.2020

The grim reality of the jobs market

As the government prepares to impose tougher local lockdown rules, the UK unemployment rate has surged to its highest level in over three years as the pandemic continues to hit jobs as many businesses are forced to close. In the three months between June and August, an estimated 1.5 million people were unemployed as the unemployment rate grew to 4.5% compared with 4.1% in the previous quarter, while redundancies rose to their highest level since 2009.

Since the pandemic began there has been a sharp increase in those out of work and overall employment is down by about half a million, with young people aged 16-24 in particular who seem to have been the most affected group as they represent around 60% of those now out of work, with a large number of redundancies had been focused on sectors such as hospitality, travel and recruitment. Meanwhile, the number claiming work related benefits hit 2.7 million in September, an increase of 1.5 million since the beginning of the crisis in March.

Unemployment is expected to rise further after the government's furlough scheme is replaced with a less generous wage support package in November. On top of this, as tougher local restrictions are being introduced this will force pubs, bars and other hospitality and leisure businesses in England to close in the most infectious areas, as has already happened in parts of Scotland.

Bank of England Governor Andrew Bailey has warned the House of Lords Economic Affairs Committee that the second wave of coronavirus cases hitting the UK economy is likely to increase the long-term damage to the economy as businesses go bust and consumer behaviour changes.

As Covid returns, and with the prospect that it will go on for longer than first imagined, the possibility of it damaging the economy is likely to increase, with the latest restrictions likely to lead to any chance of an economic recovery stalling, if not going into reverse.

There were some signs that the government's attempt to reopen and boost the economy was having some impact as payroll numbers had stabilised, although down from March. But although still relatively low by international and historic standards, the unemployment numbers being released represent a considerable increase over the third quarter, as the headline jobs numbers are beginning to catch up with the grim reality of the jobs market in certain parts of the economy since the shutdown.  We fully expect the numbers will continue to get tougher from here.

 

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