No signs of a July bounce-back in jobs as early indicators show UK’s labour market is in a weak position as jobs support is reduced

Hopes that the labour market would bounce-back in July in response to the lifting of lockdown restrictions are dampened by the further loss of 114,000 people from payrolls last month, the Resolution Foundation said today (Tuesday) in response to the latest ONS labour market statistics. 

Today’s data shows a mixed picture as the recovery enters a new phase. Hiring has restarted from a near stop earlier in the year, but, with average hours still down 20 per cent in June, signs of improvement are few and far between. 

Data for April to June reflects the lowest point of the crisis, when much of the economy was shuttered. Over 200 million fewer hours were worked between April and June than in the same period last year – a record fall of nearly 20 per cent.   

The official three-monthly measure of employment also fell in April-June, but by only 220,000 (down 0.7 per cent). However, more timely PAYE data suggests that 730,000 fewer people are on payrolls in July than in March, a fall of 2.6 per cent.  

The Foundation notes that these relatively small employment falls show how important the Job Retention Scheme has been in protecting jobs during this crisis. Although the number of people temporarily away from their work has fallen slightly from its peak in late April, there are still over 5.5 million more workers in this position than would be expected during normal times.  

The scale of furloughing has had an impact on pay. Although average weekly earnings fell by 1.1 per cent in the year to June, the hit has been hardest in certain sectors. Pay remains down 12.6 per cent in hospitality, indicating that many of these workers were still on furlough in June ahead of re-openings in July. 

More positively, job openings look to have turned a corner, with vacancies up 40 per cent (to 472,000) in July, although still down 41 per cent (323,000) on February. A bounce-back in hospitality vacancies (up to 40,000 in July, from a low point of 5,000 in May) is in line with the reopening of bars and restaurants. Leisure vacancies, on the other hand, remain at rock bottom (down 86 per cent on March), reflecting the fact that much of this industry has yet to re-open. 

With employers contributing to furloughed pay from this month, many companies will inevitably be having tough conversations about how they staff their activities over the next few months.  

The Foundation notes that the Government needs to pay heed to these early indicators and consider further measures for the sectors that will find it hardest to get back to work. 

Nye Cominetti, Senior Economist at the Resolution Foundation, said:   

“Despite the easing of restrictions on economic activity through June and July, there is little good news in today’s labour market statistics. The number of people on payrolls fell again this month, and there was no change in average hours worked or the number of people temporarily away from their job.  

“Today’s data does confirm the heavy lifting that the Job Retention Scheme has done to keep mass unemployment at bay, with over 5 million more people than before the crisis reporting that they had a job but were not working.  

“However, August is a turning point in the response to the crisis, with employers contributing to furloughed workers’ pay for the first time. Job openings, although slightly recovered since hiring stalled during lockdown, remain at low levels in the hardest–hit industries, creating a worrying environment for any workers in companies that have recently announced significant redundancy plans. 

“The Government needs to heed these early indicators and extend support to those sectors and workers that are going to be hit hardest by the economic fallout of this crisis.”