Earlier today the UK Office for National Statistics (ONS) published its latest monthly Jobs Report, mostly including data from the quarterly Labour Force Survey for the three months to February 2020. According to the ONS the labour market was ‘very robust’ at that time. But to me things looks to have cooled before the Covid-19 lockdown measures placed the economy in a coma to help save lives.
Although the number of people in work increased by a very healthy 172,000 in the three months to February (taking the employment rate to a record high of 76.6%), with fast growing labour supply this was not enough to prevent a rise of 58,000 in the number unemployed, lifting the unemployment rate back to 4%. Cooling was also evident in a fall in total hours worked, fewer job vacancies and softening in the rate of growth of average weekly earnings, which dipped to 2.9% excluding bonuses (or 1.3% in real terms). Moreover, the ONS reports more up to date figures based on PAYE data which show that the number of employees fell very slightly (by 0.06%) between February and March – what will prove to be the beginning of the largest shake-out of UK jobs for at least 40 years.
Given what we know about the massive shock to the economy in the past month, it’s disconcerting to see that the jobs market was already starting to look a bit off colour when Covid-19 arrived on our shores. Whether this has implications for how well the market recovers after the lockdown is unclear but in any case we won’t be seeing the unemployment rate anywhere close to 4% for several years, with a peak of at least 8% the best we can hope for even with the government’s welcome business support and job retention measures in place. Some scenarios, such as that published last week by the Office for Budget Responsibility, look to a jobless peak of 10%, albeit with a relatively swift recovery. For the time being I remain on the ‘optimistic’ end of the opinion spectrum. But uncertainty about the future course of Covid-19, let alone the economy, makes me feel uneasy, and I look ahead as much with hope as expectation.