Unemployment: What we know and don’t know about Covid-19's effect on jobs

As benefit claims spike and payroll workers plummet, we still don’t know the full damage caused by the coronavirus lockdown.

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What impact has the UK’s coronavirus lockdown had on employment so far?

Here’s what we know – and how much it tells us:

3.9 per cent unemployment rate

This rate, for the three months up until April, is about the same as the previous quarter, and is 0.1 percentage points higher than this time last year. Yet just because the unemployment rate has so far held steady doesn’t mean unemployment isn’t rising – there are other indicators listed below that show a more complex picture.

612,000 people dropped off company payrolls from March-May 2020

This is a 2.1 per cent drop in the number of employees on UK payrolls. Furloughed staff are kept on the payroll, so this figure represents a drop in workers being paid by their employers outside of the Job Retention Scheme.

9 million workers have been furloughed in the six weeks of lockdown

These workers are being paid through the government’s Job Retention Scheme – come August, they can return to work part-time with their employer contributing to their salary. It is thought that this scheme may be disguising or deferring the true impact on employment, which will only become clear when it finishes at the end of October this year.

2.8 million people are claiming work-related benefits

This is an increase in claimant count of 125.9 per cent – or 1.6 million people – since March. The Office of National Statistics uses the number of Jobseeker’s Allowance and Universal Credit “searching for work” claimants to count this data.

This does not translate directly into unemployment. The government introduced emergency reforms to Universal Credit at the start of the crisis, making more people eligible for it, which is part of the increased claimant count.

Also, many Universal Credit claimants are in work – according to February 2020 figures, 36 per cent of Universal Credit claimants were in employment pre-lockdown. It’s likely a significant proportion of new claimants during the pandemic will either be on lower earnings or trying to survive on statutory sick pay.

Weekly hours worked have dropped to a record low

The total number of weekly hours worked in the three months to April 2020 was 959.9 million – down a record 94.2 million (8.9 per cent) hours on the previous year. Again, this doesn’t necessarily simply paint a picture of unemployment – as the ONS points out, there was 6 million rise in furloughed workers at the end of March into April, which will have partly contributed to this record drop in hours.

Job vacancies fell to a record low

In March to May, there were an estimated 476,000 job vacancies – 342,000 fewer than the previous quarter, and 365,000 fewer than the same period last year. The ONS approximates a 60 per cent decrease in the number of vacancies from March to May. Depending on whether this trajectory continues, this could mean a bleak future labour market in the UK, and therefore greater unemployment.

Wage growth has significantly slowed

Average pay growth notably slowed in April 2020, and the three months to April saw total pay fall in real-terms for the first time since January 2018. Over the next few months, pay expectations are expected to fall, with pay likely to be frozen in the private sector.

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Lockdown is clearly putting a profound pressure on jobs and earnings in the UK. Although mass redundancies and spiralling unemployment have largely been avoided by the government’s emergency wage schemes for employees and freelancers, this help comes to an end in October.

It is also important to remember that the UK’s “employment miracle” prior to this pandemic was anything but. Although we appeared to have full employment, in-work poverty has been rising over the past five years, with one in eight workers living in poverty.

Precarious work, gig economy, casual contracts and bogus self-employment has meant a lot of the work available in this country hasn’t been paying for a long time. In addition to lockdown devastation, this is the context in which we should view the UK’s future jobs market prospects.

Anoosh Chakelian is the New Statesman’s Britain editor.

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