“The ONS labour market figures published this morning do not, on the face of it, look too bad. The unemployment rate is up a bit to 4.5%, the employment rate is down a bit but still at 75.6%. Redundancies are up, but not at levels we saw after the financial crash.
“However the figures are misleading. We are looking backwards: the data cover June to August, when the economy was beginning to recover from lockdown and hours worked were rising sharply. In parts of the country economic activity is rapidly shrinking again as government restrictions kick in once more.
“Moreover, the standard definitions of employment and unemployment are questionable when applied to the economy during the summer. The millions of people on furlough during the June to August period are counted as employed, but it must be doubtful whether all of these really had jobs to go back to. As the Coronavirus Job Retention Scheme runs down, and new government assistance is much less generous, we can expect unemployment to rise sharply in the coming months.
“There are some trends discernible even in these lagging data which are very worrying – a disproportionate decline in employment of young people; a collapse of part-time work in many sectors (as retailing, hotels, bars and restaurants were still working well under capacity during the summer); and a vertiginous fall in self-employment. And the September Claimant Count figures, published on a different basis, show a further increase in those claiming work-related benefits.
“So there is certainly nothing here at all to be complacent about. We are in for a very rocky time this winter. It makes it imperative that we scrutinise carefully plans for further lockdowns, and we prepare for eventual recovery by making it easier for new jobs to be created through reassessing unnecessary regulation in both product markets and the labour market.”
The IEA’s new briefing paper on creating new jobs once this crisis has passed, authored by Professor Len Shackleton, can be found here.