Recovery in the job market too difficult to call while furlough factor remains

IS the recovery on? Maybe. The latest data from the Office for National Statistics (ONS) certainly points to some signs of revival in Scotland’s employment market.

The official figures reflect a relatively robust labour market, particularly as they cover a period when the country remained under some of the severest lockdown restrictions. Unemployment fell to 4.2 per cent across Scotland in the three months to April, and perhaps more importantly, the number of people in work was on par with the three months before the first lockdown in March 2020.

But, as we all know, unemployment is being masked by furlough. According to official data, nearly 289,000 employees in Scotland were furloughed at the end of 2020, with provisional figures showing that this increased to more than 362,000 by the end of January.

Essentially, the use of furlough has been increasing every month from the low of 195,200 at the end of October as restrictions tightened throughout the winter.

In the here and now, the use of furlough should be going down as the move to Level Two restrictions across most of the country from the middle of May has allowed many retail and hospitality venues to resume trading on at least a restricted basis.

Hospitality recently accounted for approximately 86,000 of all furloughed jobs in Scotland, and retail accounted for a further

62,000. Combined, these two sectors made up about 40% of the total furlough pot.

With insatiable hiring demand from these sectors as restrictions have eased, you can comfortably assume that many of these employees are back in business, at least on a part-time basis. Hiring demand grew by 1,000% in hospitality, and nearly 500% in retail, during May when compared to the same month a year earlier.

Across the wider market, hiring demand continued to grow during the month of May, with more than 64,000 jobs advertised online across Scotland. That was a whopping 174% increase on the same period a year earlier, but a mere 1% higher than in April.

There are a number of factors that could be holding back month-onmonth growth. The least sinister is the onset of summer, with hiring activity is traditionally slower.

Of greater concern are potential ramifications from the postponement of “Freedom Day”, with the Prime Minister saying on Monday that the lifting all restrictions in England will be put back to July 19. The First Minister followed up yesterday saying it is unlikely any part of Scotland will move down a level from June 28, when it was hoped the whole of the country would go to Level Zero.

Yet, from July, employers will make an increasing contribution to furlough, with the scheme set to close completely by the end of September. Pleas to extend the job retention scheme in some form have been flatly rejected, perhaps undermining employers’ confidence in staffing up. As things stand, we must wait and hope that the easing of restrictions will be sufficient to support the market when furlough draws to a close.