Race is on to heal the jobs market before furlough ends

The race is on. Can the recovering economy generate enough jobs in the next three months to prevent a huge spike in joblessness when the furlough scheme ends?

Rishi Sunak, the Chancellor, will hope so: his flagship job retention scheme (JRS) has clearly saved millions of workers so far. He will not want that good work to be undone with an autumn of agony in the labour market.

The crucial number for the Chancellor is job vacancies. Is demand for workers returning? Do those who are laid off have a chance of finding a new position?

Last month there was a modest rise in vacancies, the first increase since January.

The Office for National Statistics found 370,000 available positions between May and July, up from 337,000 in the three months to June.

It gives the faintest glimmer of hope that a turnaround is on the cards.

Almost every industry reported some improvement, as retailers re-opened their doors and pubs, hotels and restaurants geared up for a relaunch last month.

Yet this is merely the first hint of light at the end of the tunnel, and remains faint and distant.

Back in February more than twice as many jobs were available, with 1.3m unemployed against more than 800,000 vacancies.

Now unemployment is oddly a touch lower, though ‘inactivity’ (those neither in work nor meeting the job-seeking criteria of the officially unemployed) rose by almost 270,000, and millions on the furlough scheme remain uncertain whether or not their jobs will return. As a result they are competing for this much smaller pool of vacancies.

Despite the latest increase, the 18,000 vacancies in hospitality represent just one-fifth of the number available a year ago. Finance and insurance vacancies remain down by half, at 17,000, and even the 103,000 positions on offer in human health and social work are one-quarter below their levels last year.

Lessons from history suggest a few months of growth is not enough to repair the harm of a crash.

In the financial crisis the number of vacancies fell by more than one-third and took around five years to recover, before really letting rip into the hiring boom of recent years.

This year’s crisis is not financial, but is led by a pandemic, hence the hope for a V-shaped recovery. 

If the economy recovers neatly back into its pre-pandemic form, jobs could return rapidly. But if the industrial structure of the nation changes, then we are in for a slower recovery.

It also poses challenges for Sunak. Should he preserve those old positions, paying workers to stay at home even when their previous jobs may never return? Or cut the furlough scheme off, putting them into unemployment but also prompting those workers to look for new jobs?

Recruiters are certainly talking up the market’s prospects.

“There is a clear demand for professionals skilled in cash management and credit control, financial planning and analysis, management accounting and financial modelling,” says Matt Weston at Robert Half UK.

“Covid-19 has also accelerated the pace of digitisation. Professionals with relevant skills, such as building cloud-based services, running IT infrastructure and analytics will be in high demand. Those already working in these fields will also be looking for a compelling reason to move to new opportunities.”

Despite this enthusiasm and the beginnings of a return to hiring, economists think demand will not recover fully in time.

“With the JRS coming to an end in October, we risk seeing a second wave of unemployment, with perhaps more than one million furloughed workers unable to return to their jobs,” says Stephen Evans, chief executive, Learning and Work Institute.

“The Government should look again at extending support for jobs in hard-hit sectors, and it must ramp up employment and training support for those who may lose their jobs.”

Those who are out of work at that point may find it hard to get back into industries that are smaller either for now or for ever.

That means moving to a growth industry instead to find work.

But shifting sectors takes time for any worker. Firms will not yet know how demand patterns will change in the fully reopened economy. Staff cannot yet tell which skills they will need if there is a change in the industrial structure of the country.

“It’s imperative then that the government starts to put in place the measures announced last month in its plan for jobs – particularly the new Kickstart scheme for young people and the big expansions of support available through Jobcentre Plus and employment services,” says Tony Wilson, director of the Institute for Employment Studies.

“However even with these measures, it looks likely that we may yet need more in the autumn spending review to support hiring and new job growth.”

The race is also on to ensure that Sunak’s reputation survives intact, too.