Labour Market Statistics, August 2020...Labour Market Statistics, August 2020 So far these falls...

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© Institute for Employment Studies 1 Institute for Employment Studies 1 Labour Market Statistics, August 2020 11 August 2020 This briefing note sets out analysis of the Labour Market Statistics published this morning. The analysis covers: The Claimant Count. This is a measure of the number of people claiming benefits who are treated as being unemployed (i.e. expected to look and be available for work), compiled from Jobseeker’s Allowance and Universal Credit data. This is not an official measure of unemployment, but it has historically followed similar trends to the official survey-based unemployment measure. Today’s data set out claimant unemployment as at 9 July 2020. Labour Force Survey data. This is a household survey that collects official data on employment, unemployment and economic inactivity. Today’s release covers the period April to June 2020, and also today includes data on flows into and between employment, unemployment and economic inactivity. Pay As You Earn Real Time Information. These are experimental statistics on employee levels and pay, covering the period to July 2020. The statistics are drawn from data supplied by employers in PAYE returns. Where data are missing (which affects approximately 10% of cases in the most recent month being reported) values are imputed based on previous returns. Summary Today’s figures largely cover the period of full lockdown (from March to June), alongside July data from employee payrolls and the vacancy survey. They show that the jobs market continued to weaken as the lockdown progressed, with further large falls in paid employment and self-employment and the number of people claiming unemployment- related benefits continuing to rise. All told, there are likely to be around one million fewer people were in paid work by July than in March, with the number of paid employees down by three quarters of a million and the number of people with self-employed earnings down by around a quarter of a million. This is a virtually unprecedented reversal, but would have been far worse without the government’s Job Retention Scheme and self-employment income support.

Transcript of Labour Market Statistics, August 2020...Labour Market Statistics, August 2020 So far these falls...

Page 1: Labour Market Statistics, August 2020...Labour Market Statistics, August 2020 So far these falls have not fed through into the official measure of unemployment, for two reasons: first

© Institute for Employment Studies 1

Institute for Employment Studies 1

Labour Market Statistics, August 2020 11 August 2020

This briefing note sets out analysis of the Labour Market Statistics published this morning.

The analysis covers:

■ The Claimant Count. This is a measure of the number of people claiming benefits who

are treated as being unemployed (i.e. expected to look and be available for work),

compiled from Jobseeker’s Allowance and Universal Credit data. This is not an official

measure of unemployment, but it has historically followed similar trends to the official

survey-based unemployment measure. Today’s data set out claimant unemployment

as at 9 July 2020.

■ Labour Force Survey data. This is a household survey that collects official data on

employment, unemployment and economic inactivity. Today’s release covers the

period April to June 2020, and also today includes data on flows into and between

employment, unemployment and economic inactivity.

■ Pay As You Earn Real Time Information. These are experimental statistics on

employee levels and pay, covering the period to July 2020. The statistics are drawn

from data supplied by employers in PAYE returns. Where data are missing (which

affects approximately 10% of cases in the most recent month being reported) values

are imputed based on previous returns.

Summary

Today’s figures largely cover the period of full lockdown (from March to June), alongside

July data from employee payrolls and the vacancy survey. They show that the jobs

market continued to weaken as the lockdown progressed, with further large falls in paid

employment and self-employment and the number of people claiming unemployment-

related benefits continuing to rise.

All told, there are likely to be around one million fewer people were in paid work by July

than in March, with the number of paid employees down by three quarters of a million and

the number of people with self-employed earnings down by around a quarter of a million.

This is a virtually unprecedented reversal, but would have been far worse without the

government’s Job Retention Scheme and self-employment income support.

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So far these falls have not fed through into the official measure of unemployment, for two

reasons: first because many of those losing paid work are saying that they have jobs to

go back to, and secondly because the official measure only counts those who were

actively seeking a new job. Today’s figures show that for the first time on record, during

the lockdown more unemployed people moved into ‘economic inactivity’ than moved into

work. (Nonetheless, data published today also showed that even in the depths of the

crisis, on average more than half a million people started a new job each month.)

The impacts of the crisis are however very clear in working hours – with these continuing

to fall over the most recent quarter, to their lowest since 1994. The last time that working

hours were this low, there were 7.4 million fewer people in work. Today’s data also

shows that the numbers of people reporting that they are ‘away’ from work actually

increased during June compared with May, which may well reflect more people taking

advantage of the full furlough scheme so that they would eligible for the partial furlough

available from July.

Looking beneath the headline measures there are worrying signs that younger people are

being particularly hard hit, with the number of young people not in full-time education or

employment rising to its highest since 2015, and nearly one in seven now claiming

unemployment-related benefits – up from fewer than one in fifteen before the crisis

began. People aged over 65 also appear to be facing significantly greater impacts than

other age groups – which may lead to increased numbers moving into involuntary

retirement.

In twenty local areas, more than one in eleven residents are on the claimant count – with

this dominated by inner cities (particularly in London), ex-industrial areas and coastal

towns. Many of these areas also had the highest levels of worklessness and faced the

most significant disadvantages before the crisis began.

The one bright spot in today’s figures is that the fall in vacancies appears to have

bottomed out, with a significant bounce-back in notified vacancies in the single-month

estimate for July. At 470 thousand this remains well below pre-crisis levels, and may

reflect short-term recruitment into covid-related roles. However if it is sustained, then it

would see vacancies return to broadly the levels that they were at during the recovery

from the last recession.

The recovery in vacancies in July gives some hope that the next couple of months may

see things start to stabilise as the economy reopens, but at the same time the ongoing

impacts of the crisis on demand – combined with the unwinding of government support –

means that the labour market impacts are far from over. Many of those on furlough will

likely come back to less secure work and shorter hours, while unemployment is also likely

to rise further and faster. With the government’s Spending Review due in the autumn, it

may well be necessary for the Chancellor to consider further measures to reduce labour

costs and support hiring.

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The number of people in paid work has fallen by around a million since the crisis began

HMRC Pay As You Earn data suggests that the number of paid employees fell by 730

thousand between March and July 2020. Most of this decline happened between March

and April, although the fall in the last month (of 115 thousand) was significantly higher

than the decline recorded the month before. This is shown in Figure 1.

This decline is not reflected in the official measure of employment (covered later in the

briefing) as it appears that many or most of those who have lost earnings still consider

that they have jobs to return to. However these are workers who are not receiving

financial support through the Job Retention Scheme, for example because they started

after the cut-off for eligibility or because of irregular or short hours (explained in more

detail in this blog by Jonathan Athow from the ONS).

Figure 1: Employee numbers reported through Pay As You Earn data

Source: Real Time Information Pay As You Earn data

In addition to this, we have also seen a significant fall in the number of people self-

employed (reported through the Labour Force Survey). Data to the end of June suggests

that the number of people describing themselves as self-employed had fallen by 240

thousand, reversing all of the growth in self-employment since 2018 (Figure 2 below).

Analysis of labour market flows data shows that this is being driven in particular by record

numbers of people leaving self-employment – although the numbers entering self-

employment have also fallen significantly (see Figure 3 below).

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Labour Market Statistics, August 2020

Figure 2: Number of people self-employed, Apr-Jun 2015 to Apr-Jun 2020

Source: Labour Force Survey

Figure 3: Quarterly flows into and out of self-employment

Source: IES analysis of Labour Force Survey flows data

It is important to note however that not all of these exits from self-employment are exits

from work. In fact, the net flow from being self-employed to being out of work was

only around 50 thousand in the quarter (with 170 thousand flowing out of work – mainly

into ‘economic inactivity’ – offset by 129 thousand moving the other way). So most exits

from self-employment were into ‘employee’ status – with a record flow of 250 thousand

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people doing so (offset by 160 thousand people going the other way – resulting in a net

shift from self-employed to employee of 90 thousand).

Combined with the fall in paid employees, this would suggest a net fall in employment of

around 800 thousand. However in addition to this, the ONS estimates that there are

approximately 230 thousand workers who are still describing themselves as self-

employed but who reported that they were ‘away’ from their job or business and not

eligible for the Self-Employed Income Support Scheme. This will include those with

profits above £50,000 a year, many company directors and those who only recently

became self-employed.

All told, this means that there are likely around one million fewer people in paid work now

than before the crisis began.

Nearly 1.5 million more people are claiming benefits and being treated as unemployed

This month’s claimant count data (to 9 July) saw a further rise in the number of people

claiming Jobseeker’s Allowance or Universal Credit and being treated as unemployed.

The 95 thousand increase reverses the fall recorded last month, and means that the

claimant count is now at its highest since March 1994.

Figure 4: Administrative unemployment and claimant count levels, 1922 to present

Source: IES analysis of Bank of England and Office for National Statistics data.

This rise is being driven by a combination of temporary lay-offs among those not eligible

for other financial support, increased exits from work and labour market entrants taking

longer to find work (particularly young people). Some of these factors were discussed in

last month’s briefing, alongside why we consider that the claimant count remains a valid a

measure of those who are claiming benefits and are treated in the benefits system as

being unemployed.

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The claimant count has now increased by 1.45 million since March, which remains the

largest year-on-year increase since the unemployment benefits system was established in

1920. The large majority of this increase – at least 1.3 million – is explained by people

without earned income, with separate data published by DWP this morning suggesting

that around 100 thousand (or 7%) is accounted for by people in work but with low

earnings.1

The difference between this 1.3 million figure and the 1.0 million fall implied in HMRC and

LFS data may be partly explained by non-working partners of new claimants who were

previously not subject to conditions but are now being treated as unemployed (i.e. they

were still out of work before the crisis), although population changes may also have made

a modest contribution.

The Labour Force Survey is showing significant falls in hours, but employment impacts remain fairly subdued

As with last month, and as referenced above, the headline Labour Force Survey

measures are still only showing muted impacts from the crisis. Figure 5 below shows that

employment has now seen a marked fall – down by 230 thousand – but as set out above,

this is being driven by large falls in the numbers self-employed, with employee numbers

once again rising (in large part due to movements from self-employment).

Today’s data also shows again that the falls in employment over the lockdown period fed

through into ‘economic inactivity’ – i.e. people who are not looking and/ or not available for

work – rather than unemployment. This is very likely to change as we start to get data

from July onwards.

1 Source: Stat Xplore. Single people earning less than £338/ month, and couples earning less than £541/

month, who are required to search for work are included in the claimant count. 14% of the those on the

count and on UC are recorded as having earned income.

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Figure 5 Changes in employment, unemployment and economic inactivity, Jan-Mar 2020 to

Apr-Jun 2020

Source: Labour Force Survey

The reason for these muted impacts is that the government’s Job Retention Scheme (and

Self-Employed Income Support) has been successful in ensuring that people remain ‘in

employment’ even if they are not currently working. The ONS has again published data

today showing week-by-week responses to the Labour Force Survey that illustrates this,

and is reproduced below. The number of people temporarily away from work – but still

counted as employed – increased from on average 2.4 million before the crisis to 8.8

million at the end of April, so a rise of 6.4 million. This includes those on the JRS, SEISS,

and those reporting that they are away from work but not earning.

Last month we reported a gradual reduction in these figures, to 7.0 million at the end of

May, however the numbers away increased again during June – reaching 7.7 million at

the end of the month. It is well plausible that this increase reflected increasing use of the

JRS by employers during June, in order to maximise the numbers who completed a

furlough period in time to be eligible for the ‘partial furlough’ that began in July.

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Labour Market Statistics, August 2020

Figure 6: Number of people employed but temporarily away from work, by week

Source: Labour Force Survey

Where the Labour Force Survey shows significant impacts, unsurprisingly, is in hours

worked – where we can see the combined effect of furloughs and falls in employment.

Figure 7 below illustrates this, showing that the total number of hours worked in the

economy fell again in the last month and is now at its lowest since September-November

1994. To give an indication of the scale of that decline, at that time there were 7.4 million

fewer people in work than there are now.

The average number of hours per worker have also fallen again, to a new low of 25.8

hours per work – down by a quarter on the pre-crisis average. This has again fed through

into falling pay, even with the 80% salary replacement paid through the furlough scheme,

with total pay in real terms down by 2.0% on a year ago (the largest fall since February-

April 2012).

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Figure 7: Total actual hours worked

Source: Labour Force Survey

For the first time on record, more unemployed people moved into ‘inactivity’ than moved into work

The ONS also re-started publication of its labour market flows time series, which

estimates the number of people moving between labour market statuses. The headline

measures showed significant falls in job-to-job moves and in job entry from

unemployment and inactivity – which fell from a combined 1.78 million to 1.58 million over

the quarter. However while these falls are significant, it could also be argued that they

are relatively low given the extent of the lockdown during April to June. So even during

the full lockdown, on average over half a million people still started a new job each month.

The data also shows the extent of the shift from employment and unemployment into

economic inactivity – with 1.04 million people flowing into economic inactivity over the

quarter (compared to an average of 800 thousand per quarter over the previous year) and

a net positive flow (after accounting for those leaving inactivity) of 75 thousand. Both of

these figures were the highest since this dataset began in 2001.

This flow into inactivity has been driven in particular by people exiting unemployment –

i.e. stopping looking for work. As Figure 8 below illustrates, for the first time ever more

people exited unemployment for inactivity than did so for work. This was particularly

driven by a record increase in the proportion leaving for inactivity, although the proportion

leaving to employment fell to the lowest since April-June 2018.

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Labour Market Statistics, August 2020

Figure 8: Quarterly flows from unemployment into employment and economic inactivity

Source: Labour Force Survey flows data

The youngest and oldest appear to be seeing the most significant impacts

Labour Force Survey data by age is so far showing very little signs of negative impacts for

different population groups, which in part likely reflects the fact that the impacts overall in

the LFS have been subdued. ONS published quarterly data today on both employment of

disabled people and ethnic minority groups, and both showed the ‘gaps’ in employment

rates narrowing over the year (when compared with non-disabled and white people

respectively).

However there do appear to be tentative signs in the LFS data that the very youngest and

very oldest workers are seeing more significant impacts, with their employment rates

falling while the rates for those aged 25-64 have stayed broadly the same. This is shown

in Figure 9 below. There may be different factors explaining these trends – in particular a

slowdown in hiring affecting young people, and involuntary early retirement among older

workers.

The last month has also seen a further increase in the number of young people not in full

time education nor employment – rising to 1.06 million, or one in six of all young people

(15.4%). As with last month’s figures, this is the highest level since 2015.

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Figure 9: Change in employment rates by age, Jan-Mar 2020 to Apr-Jun 2020

Source: IES analysis of Labour Force Survey

These different impacts by age are also reflected in the claimant count data. Figure 10

below shows that the proportion of young people on the claimant count has continued to

rise, and is now at close to one in seven of all 18-24 year olds (13.8%). This compares

with around one in fifteen before the crisis began. The claimant count has risen by 125%

for young people, which is higher than for any other age group, although across the age

distribution the numbers have either nearly doubled or more than doubled.

Figure 10: Estimated claimant unemployment rates by age, March-July 2020

Source: IES analysis of NOMIS claimant count and ONS Labour Force Survey data

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The claimant count is generally higher in more disadvantaged areas, but has risen fastest in the south

Figure 11below illustrates that claimant count rates are highest in the North East (10.0%),

West Midlands (8.7%) and North West (8.4%) – as was the case before the crisis. The

percentage point rises in unemployment however remain fairly consistent across regions,

rising by on average 4.0 percentage points since March. The exception to this is London,

where the rate has risen by 4.7 percentage points – going from having one of the lowest

rates to being among the highest.

Figure 11: Claimant count rate by region or nation, March-July 2020

Source: IES analysis of NOMIS claimant count data

The fact that unemployment rates have increased by similar amounts between regions

also means that as with last month, the percentage rise in unemployment has generally

been greater in areas where unemployment rates were previously lower. As Figure 12

shows, claimant unemployment has risen by 150% or more in the South East, South West

and London, compared with 70% in the North East (albeit from a higher base).

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Figure 12: Percentage increases in claimant unemployment by region, March-July 2020

Source: IES analysis of NOMIS claimant count data

Looking at local authority level data, there is a positive but still relatively weak correlation

between the claimant count rate in March and the percentage point increase in the rate

since then. In other words, areas that had higher claimant count rates have generally

seen larger per capita increases during the crisis. However the correlation is not

particularly strong, which likely reflects that this has been a broad-based crisis with many

relatively more disadvantaged areas being somewhat protected by their greater reliance

on public sector jobs (and in particular jobs in health and social services).

Figure 13 sets this out in more detail, plotting pre-crisis claimant rates and the percentage

point change in the rates since the crisis for each local authority area. A number of local

authorities stand out as having had increases of 5 percentage points or more, comprising

eleven London Boroughs2 plus Slough, Luton and Blackpool.

2 Haringey, Newham, Brent, Waltham Forest, Barking and Dagenham, Ealing, Enfield, Hackney, Redbridge,

Lewisham and Hounslow

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Labour Market Statistics, August 2020

Figure 13: Percentage point change claimant count rate, by claimant count rate in March

2020

Source: IES analysis of NOMIS claimant count data

Looking at individual local authorities, those areas with the highest claimant count rates

are now dominated by London boroughs, coastal towns, ex-industrial areas and some

inner cities. Table 1 below illustrates this, showing areas where more at least one in

eleven working age adults (9%) are on the claimant count.

Table 1: Local authorities where at least one in eleven working age adults are on the

claimant count

Local authority Region

Proportion of 16-64 population Change

(percentage) June 2020

March 2020

Change (percentage

point)

Blackpool North West 7.2 12.3 5.1 72.1

Birmingham West Midlands 6.7 10.9 4.2 62.4

Thanet South East 5.7 10.5 4.8 85.5

Wolverhampton West Midlands 6.4 10.4 4.0 64.0

Middlesbrough North East 6.2 10.3 4.1 65.9

Haringey London 3.8 10.3 6.5 170.9 Barking and Dagenham London 4.4 10.3 5.9 135.9

Brent London 3.6 9.9 6.3 175.9

Hull Yorks and Humber 5.8 9.7 3.9 66.7

Newham London 3.3 9.7 6.4 192.7

Oldham North West 5.2 9.6 4.4 86.1

South Tyneside North East 6.2 9.5 3.3 53.3

Waltham Forest London 3.5 9.5 6.0 173.2

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0

Perc

enta

ge p

oin

t in

cre

ase t

o J

uly

2020

Claimant count rate in March 2020

London Boroughs

Blackpool

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© Institute for Employment Studies 15

Institute for Employment Studies 15

Hartlepool North East 6.0 9.4 3.4 55.4

Bradford Yorks and Humber 5.2 9.3 4.1 80.5

Sandwell West Midlands 5.3 9.3 4.0 76.2

Ealing London 3.6 9.3 5.7 155.0

Burnley North West 5.4 9.1 3.7 67.5

Hackney London 3.8 9.1 5.3 139.5

Lewisham London 4.0 9.1 5.1 129.7

Manchester North West 4.6 9.0 4.4 95.9

Croydon London 4.4 9.0 4.6 104.8

Source: IES analysis of NOMIS claimant count data

Vacancies have shown tentative signs of recovery, but redundancies have also ticked up

Finally, today’s data shows a very slight recovery in the number of vacancies recorded

through the ONS Vacancy Survey. This reports an average of 370 thousand in the three

months from May-July, compared with an average of 337 thousand reported last month.

However underneath this, the single-month estimate for July itself is more positive still –

reporting around 470 thousand vacancies in the economy. This is being driven

particularly by smaller employers, including in the public sector, professional services and

hospitality – and likely reflects covid-related recruitment as lockdown has eased (for

example to support businesses to reopen and prepare). If this recovery is sustained, then

it would see vacancies returning to the sorts of levels that they were at in the aftermath of

the last crisis.

However today’s figures have also seen a worrying rise in redundancies, up to 134

thousand in the quarter to June, from 107 thousand in the quarter to March. This is now

the highest level since February to April 2013 and will likely rise further as the various

support measures start to unwind.

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Labour Market Statistics, August 2020

Figure 14: Job vacancies

Source: ONS Vacancy Survey.

Conclusions and implications

Today’s data continue to send some conflicting messages on the state of the labour

market during the crisis. However it does appear that paid employment fell by around one

million during the lockdown – an unprecedented fall, but one that could have been far

worse without the Job Retention Scheme and support for the self-employed.

These impacts are starting to feed through into the headline labour force survey

measures, and suggest in particular that young people and the oldest workers are being

most significantly affected. As with last month, the impacts across areas are fairly

consistent, reflecting the broad based nature of the crisis. However those areas with

weaker labour markets before the crisis appear likely to face the most significant

challenges in the recovery – particularly in inner city, ex-industrial and coastal areas –

while London boroughs in particular have been hit hard, reflecting their reliance on private

sector jobs, the visitor economy and office-based work.

The recovery in vacancies in July gives some hope that the next couple of months may

see things start to stabilise as the economy reopens, but at the same time the ongoing

impacts of the crisis on demand – combined with the unwinding of government support –

means that the labour market impacts are far from over. Many of those on furlough will

likely come back to less secure work and shorter hours, while unemployment is also likely

to rise further and faster. With the government’s Spending Review due in the autumn, it

may well be necessary for the Chancellor to consider further measures to reduce labour

costs and support hiring.

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100

200

300

400

500

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700

800

900

May-0

1

Dec-0

1

Jul-02

Feb-0

3

Sep-0

3

Apr-

04

Nov-0

4

Jun-0

5

Jan-0

6

Aug-0

6

Mar-

07

Oct-

07

May-0

8

Dec-0

8

Jul-09

Feb-1

0

Sep-1

0

Apr-

11

Nov-1

1

Jun-1

2

Jan-1

3

Aug-1

3

Mar-

14

Oct-

14

May-1

5

Dec-1

5

Jul-16

Feb-1

7

Sep-1

7

Apr-

18

Nov-1

8

Jun-1

9

Jan-2

0

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About IES

The Institute for Employment studies is an independent, apolitical centre of research and consultancy in employment policy and human resource management. It works with employers, government departments, agencies and professional and employee bodies to support sustained improvements in employment policy and practice.

Institute for Employment Studies, City Gate, 185 Dyke Road, Brighton, BN3 1TL United Kingdom

www.employment-studies.co.uk

@EmploymtStudies

01273 763400