Labour market deterioration “not (yet) as bad as feared”, says IEA expert
IEA Economics Fellow Julian Jessop responded to the latest unemployment statistics published by the Office for National Statistics (ONS)
“It is no surprise that the labour market has weakened given the depth of the Covid-19 recession. The real news is that the deterioration is not (yet) as bad as feared.
“For example, revisions to previous data mean that the fall of 695,000 in the number of payroll jobs between March and August was actually less than the 730,000 decline originally reported for March to July.
“What’s more, almost all of these jobs went in April (469,000) and May (147,000) when GDP was collapsing. Since then the declines have been much smaller (averaging 26,000 per month) as hiring in particular has picked up again.
“Of course, this may just be the calm before the storm. The end of the government furlough scheme on 31st October is a big deal, but it should still not be the ‘cliff edge’ many dread. The winding down of the scheme actually began in August, when firms had to pay NICs and pension contributions.
“Most people have already returned to work and even some of those still ‘furloughed’ will be working again part-time. Most firms are also already topping up wages voluntarily, which suggests they want to keep staff on board.
“Many other forms of government support are now available, including measures targeted at younger people and at areas and sectors still (or back) in lockdown.
“Above all, the UK’s relatively flexible economy is rebounding strongly and is usually good at creating new jobs to replace any that are lost. The government needs to step back where it can and let the labour market work properly again.”
Notes to editors
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Julian Jessop is available for further comment.
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.
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