The UK could be facing the largest unemployment crisis for at least 25 years, reports The Independent .
The coronavirus pandemic has put many people out of work and has others stuck on the government’s furlough scheme, with massive economic damage expected as the country has been in lockdown to save lives.
Even if people still have a job to go back to it’s often the case that they aren’t working as many hours as they did before. Full-time workers are finding themselves returning on part-time shifts.
It is unlikely that the economy is going to bounce back quickly from the pandemic. While much of the damage done will be repaired swiftly the economy is expected to shrink by eight per cent overall in 2020 and it could take years to recover.
Businesses are expected to struggle and when they do firms lay off staff in an effort to downsize and survive, if enough new jobs aren’t created in the meantime then plenty of people could be stuck without the prospect of employment for a while.
Is the UK headed for a significant jobs crisis?
Overall unemployment has increased by just 0.1 per cent in the three months to April , but much larger job losses are expected to come in the future. The employment rate in April fell by 0.8 per cent, the largest drop since 2009.
On the surface the figures don’t look horribly bad right now, while it seems like the government’s furlough scheme might have done a decent job at protecting people from losing their jobs.
A total of 9.1 million employees are having their wages paid in part by the government, while 2.6 million people are on the self-employed scheme. In total more than a third of the UK’s workforce is being propped up by the government , what will happen to them when that support ends is unlikely to be positive.
The jobs of many people are being safeguarded as long as the furlough scheme remains in place, what happens after that is far less certain.
Right now the jobs market is not doing as badly as the economy, though a look into the future is not at all encouraging.
The Counter Claim
The number of workers on company payrolls has dropped by 612,000 between March and May, suggesting that hundreds of thousands of jobs have gone which will soon show up on the official unemployment statistics.
More job losses are expected once the furlough scheme wraps up, right now it is the only thing which is technically keeping some Brits in a job.
The number of people who were classed as self-employed also dropped by 131,000 in the three months to April.
A quarter of firms have said they will struggle to pay a portion of their furloughed workers wages when the time comes for them to take up some of the slack in August. If businesses cannot pay even a portion of their wage bill then there will be more job losses as the furlough scheme is scaled back.
Paul Johnson of the Institute for Fiscal Studies warned that the UK could be hit by three waves of unemployment .
The more than 600,000 worth of job losses may only represent the first wave, while a second wave of jobs could be lost as the furlough scheme is rolled back and a third wave of unemployment might hit when it finishes at the end of October.
Hundreds of thousands of people off companies’ books, more people claiming unemployment benefits and a huge drop in the number of vacancies available adds up to a very worrying future for the jobs market.
The current unemployment figures may be confused by the steep rise in the number of people classed as “economically inactive”. They are not actively looking for work and don’t show up on unemployment figures.
Employment fell by 429,000 in April but the number of economically inactive people rose by 425,000, meaning hardly any showed up as officially unemployed.
It appears as though over 600,000 people have lost their jobs during the pandemic while the furlough scheme has been at its strongest. The less the scheme does as it is rolled up over the next few months the more jobs are likely to be lost.
To make matters worse, the UK has been hit by the largest drop in vacancies since records began.
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Between March and May the total number of vacancies advertised dropped by 342,000 to 476,000 as employers were unlikely to take on more staff during the pandemic.
People who have lost their job may struggle to find another one, while further job losses will increase the number of people searching for employment while the number of opportunities drops.
If employers are losing money and have to lay off staff then they are hardly likely to advertise for new openings.
The situation with jobs is already bad and by all indications it’s going to get significantly worse as the furlough scheme wraps up and businesses cannot afford to keep the same amount of employees.