Va­can­cies at low­est level for 20 years

To see the omi­nous signs of what is to come, we must look be­yond the of­fi­cial head­line fig­ure, writes Russell Lynch

The Daily Telegraph - Business - - Front Page - By Lizzy Bur­den and Tim Wal­lace

BRI­TAIN’S loom­ing jobs cri­sis is be­gin­ning to bite af­ter the num­ber of peo­ple in work plunged by 649,000 since lock­down be­gan in the fastest slump on record, and va­can­cies hit the low­est level since fig­ures started be­ing col­lated al­most two decades ago.

An­other 74,000 jobs were lost last month with the num­ber of peo­ple on pay­rolls down to 28.4m, ac­cord­ing to the Of­fice for Na­tional Statis­tics.

This drop of 1.9pc com­pared with last June ef­fec­tively wipes out more than two years of strong jobs growth. It is likely to be an un­der­es­ti­mate of the to­tal hit to the jobs mar­ket be­cause it does not in­clude the self-em­ployed, while a num­ber of work­ers have been pro­tected by the fur­lough scheme but may not end up be­ing taken back on.

Just over a fifth of work­ers are still be­ing paid by the Gov­ern­ment to stay at home, al­though this is down on the roughly one third who have been fur­loughed at some point, in­di­cat­ing a num­ber of jobs are re­turn­ing as lock­down lifts.

Mark Twain once said there are “lies, damned lies, and statis­tics”, and the lat­est of­fi­cial fig­ures on the jobs mar­ket rather prove his point. The Of­fice for Na­tional Statis­tics tells us the UK’s unemployme­nt rate was just 3.9pc in the three months to May, but only some­body liv­ing on the moon for the past six months will be­lieve that is pos­si­bly the case.

The ONS, in fair­ness, is not in­tend­ing to de­ceive. But in a week when the Of­fice for Bud­get Re­spon­si­bil­ity has put the rate closer to 9pc, it has stuck rigidly to a def­i­ni­tion of unemployme­nt that paints a mis­lead­ing pic­ture of the na­tion’s loom­ing jobs catas­tro­phe.

To see the signs of this, you have to look else­where in its myr­iad of charts be­yond the bland-look­ing head­lines. Covid-19 has pre­sented unique chal­lenges to statis­ti­cians along with the rest of the coun­try. But to be un­em­ployed in the of­fi­cial def­i­ni­tion, you have to be not work­ing and look­ing for a job. That means that those mil­lions of work­ers on fur­lough – classed as “tem­po­rar­ily ab­sent” from work – are counted as em­ployed.

The Chan­cel­lor has warned against giv­ing “false hope” by ex­tend­ing the fur­lough, and the OBR’s cen­tral sce­nario has 15pc of those 9.4m jobs mov­ing into unemployme­nt. Hence it will soon be­come clear that a sig­nif­i­cant num­ber of those work­ers are about to be per­ma­nently, rather than tem­po­rar­ily, ab­sent. Up to 500,000 em­ploy­ees count them­selves tem­po­rar­ily ab­sent with no in­come at all. The pan­demic, mean­while, has also boosted the num­ber of peo­ple drop­ping out of the labour force and count­ing them­selves “eco­nom­i­cally in­ac­tive”. The num­ber who want a job but are not look­ing is up a record 253,000 over the quar­ter, but that does not add to the unemployme­nt tally.

John Philpott, a vet­eran labour mar­ket econ­o­mist, says: “Add these ex­tra ‘want work in­ac­tive’ peo­ple – the ‘hid­den’ job­less – to the ac­tive unemployme­nt pool and the full mag­ni­tude of the un­der­ly­ing labour mar­ket cri­sis be­comes more ap­par­ent.”

Clearer hints of the pain are seen in mea­sures such as the more ex­per­i­men­tal PAYE data, which show 649,000 fewer em­ploy­ees on com­pany pay­rolls in June com­pared to be­fore the pan­demic, as well as an ex­tra

1.5m ben­e­fit claimants.

The ONS warns that the ex­panded el­i­gi­bil­ity of uni­ver­sal credit means it is not a proxy for unemployme­nt as

‘One thing we are cer­tain of is that Mr Su­nak will surely have to ad­just his poli­cies in the Bud­get this au­tumn’

ben­e­fits can be claimed by those in work, but it is likely to be closer to the truth than a head­line unemployme­nt rate of 3.9pc.

The claimant count data for “June” is usu­ally only taken for the sec­ond Thurs­day of the month more­over, so the lat­est num­bers were minted just days be­fore UK com­pa­nies an­nounced tens of thou­sands of job cuts ahead of the curb­ing of the fur­lough scheme. There will be more bad news to come from this quar­ter.

Where “in­ac­tive” work­ers or the gen­uinely un­em­ployed will find new po­si­tions re­mains the key question as va­can­cies are cur­rently at an all-time low, hav­ing col­lapsed since coro­n­avirus struck. That makes the task of the Chan­cel­lor, who has pumped bil­lions into job cen­tres and a new Kick­start work place­ment scheme, all the more ur­gent.

“The of­fi­cial mea­sure of job va­can­cies re­mains con­sis­tent with very large job losses over the com­ing months,” warns Sa­muel Tombs, chief UK econ­o­mist at Pan­theon Macroe­co­nomics.

The other dis­tort­ing im­pact of the tax­payer’s sup­port for jobs is a record col­lapse in hours worked, be­stow­ing an all-too tem­po­rary boost to the UK’s pro­duc­tiv­ity, as it is mostly the lower-pro­duc­tiv­ity ser­vices and hos­pi­tal­ity jobs that have been fur­loughed. But the job re­ten­tion scheme also only cov­ers 80pc of work­ers’ pay, which is re­flected in an­nual pay growth turn­ing neg­a­tive for the first time in six years. The pain on pay hardly rep­re­sents con­di­tions for a con­sumer recovery, de­spite the ef­forts of Su­nak to pump-prime spend­ing with restau­rant vouch­ers and a VAT cut.

All told, these fig­ures – and par­tic­u­larly the re­mark­ably low head­line job­less rate – do lit­tle more than il­lus­trate the ef­fect of putting the tax­payer’s finger in a creak­ing unemployme­nt dam. As In­vestec econ­o­mist Philip Shaw puts it, “one thing we are cer­tain of is that Mr Su­nak will surely have to ad­just, or at least fine tune, his poli­cies in the Bud­get this au­tumn and quite pos­si­bly even be­fore”. When the dam bursts, it will not be pretty.

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.