Stephen Evans, Chief Executive at Learning and Work Institute, said:
The labour market continues to recover with significant increases in employment and record vacancies, and no signs yet of the end of furlough leading to a sustained increase in unemployment. However, employment is still 567,000 below pre-pandemic levels and we estimate there are around 1 million fewer people in the labour force than if pre-pandemic trends had continued. Record vacancies are therefore partly a reflection of employers struggling to recruit. We face an uncertain winter, with economic growth slowing and uncertainty around the impact of Omicron. We need to boost our efforts to match people with the available jobs and ensure they have the skills needed.
1. The labour market continues to recover, though employment remains below pre-pandemic levels
Employment rose by 149,000 in August to October 2021 compared to the previous quarter but remains 567,000 lower than before the pandemic. The timelier but less comprehensive measure of PAYE employees increased by 257,000 in November 2021 compared to the previous month and is 424,000 above its pre-pandemic level. Unemployment fell by a further 127,000, but economic inactivity remains 377,000 higher than pre-pandemic.
The number of vacancies remains at record levels, and the number of postings supplied to Indeed is almost 50% above pre-pandemic levels.
2. A lower economic activity rate means fewer potential workers for employers to recruit
Our analysis shows there are around 1 million fewer economically active people (either employed or unemployed) than if pre-pandemic trends had continued. One third is the result of a lower population, two third due to people stopping looking for work (growth in economic inactivity).
In the early parts of the pandemic there were falls in levels of economic activity as people stopped looking for work, reflecting lower vacancies, health concerns and economic restrictions. The economic activity rate has not fully recovered despite the economy reopening and vacancies being at record levels. The 2.3 million people economically inactive due to long-term sickness or disability, up 4.9% in the last quarter, should be a key focus.
In addition, the number of people claiming unemployment-related benefits remains 546,000 above the survey measure of unemployment, despite a fall of 50,000 in November 2021 compared to the previous month. It is important that Jobcentre Plus engage with all of those on out-of-work benefits to ensure their status is recorded correctly and everyone who wants to work gets help to find a job.
3. It seems likely the furlough scheme ended as a success, with few signs yet of a significant increase in unemployment
There were 1.14 million people furloughed at the scheme’s end in September 2021, of whom 640,000 were fully furloughed. The early signs are that the end of the scheme has had relatively little impact on employment. The number of people made redundant remains relatively low and at pre-pandemic levels.
In late October 2021, the ONS’ Business Insights and Conditions Survey (BICS) found that 87% of formerly furloughed employees had returned to work. In late November 2021, the ONS’ Business Insights and Conditions Survey (BICS) found that 84.9% of businesses did not expect to make any employees redundant over the next three months. Similarly, a Resolution Foundation survey suggested that 88% of employees who were furloughed in September were working in October, with 3.4% unemployed and 8.5% leaving the labour market and becoming economically inactive. That would equate to 136,000 of those furloughed in September not being in work in the first half of October, with a rise in unemployment of around 39,000, and an increase in inactivity of 97,000. The ONS has stopped allowing ‘furlough’ as a category for the reason someone in work was working fewer hours than usual. After that, there were rises in the categories for ‘Demand’, ‘Staying at home’ (including shielding), and ‘Other’ – any other coronavirus related reason.
4. Long term unemployment has fallen for young people but continues to rise among older adults
Long-term unemployment is a particular concern as it reduces people’s chances of finding work and can reduce their health and wellbeing.
Long-term unemployment rose significantly through the pandemic. It has fallen recently for young people though is still 10,000 higher than pre-pandemic. However, the number of people aged 25 and over out of work for 12 months or more is 113,000 (47%) higher than before the pandemic (Dec 19-Feb 20). The Government’s Restart programme and other support need to tackle this.
There have been rises in the number of young people staying in full-time education through the pandemic. This can be a sensible response to a tough labour market and, if the education is high quality, helps tackle some of our skills shortfalls with other countries. Overall, though, support for young people remains too disjointed: we argue for a Youth Guarantee to offer all 16-24 year olds a job, training place or apprenticeship.
5. The employment picture varies significantly across the UK, highlighting the importance of a tailored approaches
Data on labour market conditions at local level is relatively limited. The proportion of people claiming unemployment-related benefits (the claimant count) provides a useful measure but is affected by the challenges of benefit administration in a pandemic. As noted above, this means the claimant count is currently higher than the survey measure of unemployment. However, these data can still give an indication of comparisons between areas at a point in time.
Of the combined authority areas, London and the UK nations, the claimant count was highest in the West Midlands before the pandemic (7.8%) and remains highest now (7.6%).
The Government’s Levelling Up White Paper, expected in early 2022, needs to show how national services and local leadership can provide a joined-up, effective approach to widening employment opportunity.