649,000 drop in employees on UK payrolls

There are 649,000 fewer employees in the UK on payrolls now compared with March, and vacancies are at their lowest level for almost two decades, but the rate of job decline is slowing, according to data from the Office for National Statistics (ONS)

The labour market statistics show a 2.2% fall in the number of employees in the UK on payrolls since the start of the pandemic.

Vacancies in the UK in April to June 2020 were at the lowest level since the ONS began collecting figures in 2001, at an estimated 333,000; this is 23% lower than the previous record low in April to June 2009.

The three months to May 2020 also saw strong falls in pay; total pay fell by 0.3% on the year, this equates to a fall of 1.3% when taking into account inflation.

The ONS also said there are some signs of economic inactivity rising, with people out of work not currently looking for work. Hours worked has continued to fall reaching record lows both on the year and on the quarter.

There are still a large number of people temporarily away from work, including furloughed workers, although this is falling through May. New analysis shows that there were around half a million people away from work because of the pandemic and receiving no pay.

Jonathan Athow, ONS deputy national statistician for economic statistics, said: ‘As the pandemic took hold, the labour market weakened markedly, but that rate of decline slowed into June, though this is before recent reports of job losses.

‘The Labour Force Survey is showing only a small fall in employment, but shows a large number of people who report working no hours and getting no pay. Both tax and survey data also show the number of new starters has fallen sharply.

‘There are now far more out-of-work people who are not looking for a job than before the pandemic.

‘Pay is now falling on most measures, with many furloughed workers not having their wages topped up by their employers.’

Yael Selfin, chief economist at KPMG UK, said the unemployment figures ‘represent the calm before the storm’, as the government’s furlough scheme had shielded the labour market from the worst of the immediate crisis.

‘A sharp decline in the number of self-employed men, and around half a million workers who were temporarily away from their work due to Covid-19 without pay, point at a worse picture than the headline numbers convey,’ Selfin said.

Jing Teow, senior economist at PwC, said that while the data painted a ‘start picture’ of the impact of the pandemic and sector lockdowns on workers, it also suggested very early signs of recovery.

‘Total actual hours worked in the three months to May - a better indication of activity given that many workers are on furlough - declined by historic levels, falling 16.7% compared to last year.

‘And while the unemployment rate has remained largely unchanged, that is because large numbers of people out of work are not currently looking for work in this difficult climate, causing economic inactivity to rise.

‘However, the monthly data paints a more hopeful picture with very early signs of recovery. Actual hours worked on a weekly basis showed signs of increasing in May, while the decline in vacancies and the claimant count saw signs of tailing off in June.’ Teow said.

Howard Archer, chief economic advisor to the EY ITEM Club, cautioned that unemployment remains a challenge to the UK’s recovery.

Archer said: ‘The damage to the labour market has been substantially limited by companies’ ability to furlough workers under the government’s Coronavirus Job Retention Scheme.

‘Latest data from the Treasury show that the job retention scheme now covers 9.4m workers, costing £28.7bn so far.

‘Fuelling concerns over the labour market, a substantial number of redundancies have been announced so far in July across a number of sectors, and particularly in the retail sector.

‘Furthermore, a survey by Make UK revealed that some 46% of manufacturers expect to make redundancies over the next six months, up from 25% in May.’

Labour market overview, UK: July 2020

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