Rising unemployment is a slowly unfolding crisis. For many employers, decisions about redundancies and hiring have taken a back seat while they consider how to survive the pandemic.
The cushion of the government’s furlough scheme has also provided them with some breathing space, allowing them to send staff home and take a longer look at how many they think they might need.
Yet with almost 700,000 people finding themselves out of work between March and July, it is clear the situation is already worsening.
In a disturbing assessment of the outlook for jobs, the Institute for Employment Studies says the UK is on the cusp of suffering “a prolonged labour market shock”.
This view follows not just the latest labour market figures, which give a picture of the first five months following the coronavirus lockdown, but the signals sent by employers showing how they plan to cope with the ending of the furlough scheme next month.
They plan to cope by laying off hundreds of thousands more workers. The IES is predicting that there will be 445,000 redundancies between 1 July and 30 September, with most of them occurring in August and September. It believes there will be a further 205,000 between October and December.
As with previous recessions, the pain will not be spread evenly. The Office for National Statistics said that between May and July, the north-west was the biggest loser after a 0.6 percentage point increase to an unemployment rate of 3.5%.
The north-east remains the region with the highest level of unemployment at 5.2%.
A long term trend for larger companies to cut administrative and “white collar” staff is also likely to accelerate.
Recent data from LinkedIn, the work-focused social network owned by Microsoft, shows that the proportion of workers with new jobs in the media, software and finance has lagged behind other sectors despite the gradual return to workplaces.
Meanwhile, the ONS found the number of young people in the UK without a job rose by 156,000 in the three months to July. This leap in unemployment for those aged between 16 and 24 resulted in the biggest drop in employment compared with other age groups.
Concerns that the young are bearing the brunt of the crisis is recognised inside the Treasury. The chancellor, Rishi Sunak, has set aside funds for training to allow young people made redundant to acquire new skills.
However, the sheer scale of job cuts to come is likely to dwarf these efforts. Dave Innes, the head of economics at the Joseph Rowntree Foundation, echoed the calls by business groups and economists for an extension of the furlough scheme in some form when he said “avoiding entirely preventable mass unemployment and the long-lasting economic and social scarring that accompanies it should be a priority”.
So far the Treasury has refused to budge, saying the furlough scheme must end on 31 October. How long it can stick to this deadline remains to be seen.
