Labour market trends: look beyond the headline figures
As others have commented, they do not look too bad at first glance. The unemployment rate crept up to 4.9%, but this is still way below comparable figures in other European countries. The increase in redundancies in this period was old news (the peak was in September) and arguably smaller than might have been expected given the slump in economic activity.
Surveys suggest that households have become less pessimistic about job security. This mainly reflects the extension of the government’s furlough scheme. But it also reflects the way that firms have chosen to cut back on hours rather than employment in this recession.
This, by the way, is a two-edged sword: employees who ‘hoard labour’ in this way avoid costly redundancies and the costs involved in recruitment and training of new employees when recovery comes. But meanwhile productivity falls, restructuring is delayed, and good employees may leave in pursuit of better-paid work – with the result that, on recovery, the average quality of the workforce has declined.
Insolvencies remain well below levels in previous recessions, reflecting low interest rates and the fact that many firms in financial trouble were just about holding on. The fear is that the second extended lockdown will finish them off.
If we disaggregate today’s figures, some interesting features emerge.
For one thing, the hit to jobs between August-October and the previous quarter is, in net terms, confined to the self-employed, who have been particularly badly affected by the recession. Self-employment was 183,000 lower – while the numbers in employee jobs actually rose by 38,000 compared with May-July.
I have drawn attention in a new IEA Briefing Being Your Own Boss to the way in which the self-employed have suffered disproportionately in the pandemic. It is something that the government needs to think about more carefully, as at the moment the Chancellor seems inclined to impose tighter regulations and higher national insurance contributions as a quid pro quo for the Self-employment Income Support Scheme – even though this benefited less than half the self-employed.
There are significant gender differences which are not picked up in the headlines. Amongst employees, men were harder hit than women: male employee numbers fell by 66,000 while female employees rose by 105,000. Women are disproportionately employed in the public sector, which has been expanding employment during the pandemic while the private sector shrunk.
Amongst the self-employed, however, the picture was different. The number of male self-employed fell by 90,000, while female self-employment fell by 93,000 – from a much lower base.
Then there are big differences by age. Young people’s jobs have been particularly at risk. The latest figures show that the number of 16-24-year-olds in employment fell by 90,000 compared with the previous three months. But the numbers aged 65+ rose by 70,000.
Some of these figures may seem counterintuitive, but as I have observed many times before, the labour market is a complicated place and we should look behind the headlines to see what is really going on. Changes in the ‘stocks’ of particular employment statuses can occur as a result of a number of possible changes in flows in and out of different statuses.