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Institute for Employment Studies 1 Labour Market Statistics, June 2021 15 June 2021 This briefing note sets out analysis of the Labour Market Statistics published this morning. The analysis mainly draws on Labour Force Survey (LFS) and Pay As You Earn (PAYE) Real Time Information data. The former is the main household survey that collects official figures on employment, unemployment and economic inactivity, with the most recent data covering the period February to April 2021. PAYE data are administrative payroll figures on employee levels and pay, covering the period to May 2021. This is supplemented with analysis from the ONS Vacancy Survey, which collects employer data on open vacancies and also includes data up to May 2021. Summary The labour market is continuing to recover strongly, with PAYE employment growing by nearly 200 thousand during May; vacancies in May close to their highest ever level and the headline unemployment rate ticking down to 4.7%. This appears to be being driven by new job starts, particularly in industries that were shut down and starting to reopen, and there are signs that at last young people are starting to benefit from that recovery – accounting for nearly half of the growth in PAYE employment last month. However, we continue to see long-term unemployment rising strongly, now breaching half a million for the first time in five year, and rising across age groups; we are seeing large falls in part-time work, not explained by more people getting the hours that they want and nor entirely offset by rising full-time work; and even with recent employment growth, there remains very significant ground to make up for young people, those previously self- employed and in London. Furthermore even while increasing numbers of firms report recruitment difficulties, unemployment is still elevated – with well over two unemployed people for every vacancy, compared with around 1.6 before the crisis. Looking ahead, the announcement of a month-long delay to the roadmap will take some of the wind out of the sails of the recovery but should not send us significantly off course. If there are further significant delays, or indeed a need for further restrictions, then government will need to revisit its plans for the winding down of the furlough scheme and other support. But in the meantime, today’s data suggests that we need to refocus effort on helping those out of work to get (back) into work, as well as working much better with employers to fill their vacancies (including by ensuring that those jobs have the shift patterns, entry requirements, skills support and pay to enable them to be filled quickly).
2 Labour Market Statistics, June 2021
Note that as with recent months’ analysis, there remain concerns around how population
changes and lower response rates may have affected the reliability of the LFS, and the
ONS published more detail last month on how this will be addressed in future. This may
mean that today is the last set of data with these caveats. In the meantime, the ONS
continue to advise that reported levels in the LFS should be treated with caution, although
rates remain robust. For this reason we have continued to use PAYE data in preference
to LFS figures where both are available (in reporting on the levels of employment,
changes by age and region); and as far as is practicable where LFS data is used we have
limited the analysis to reporting on changes in rates rather than levels. Where levels are
used, we have made this clear in the text.
The ‘elephant recovery’? Employee numbers have
bounced back, but the LFS remains more subdued
Today’s figures show the strongest growth yet in PAYE data, with the number in
employee jobs growing by nearly 200 thousand in the month of May alone (the highest
since this data series started in 2014), and now just half a million below pre-crisis levels.
Figure 1 illustrates this, and suggests that we may be seeing the beginnings of a U-
shaped recovery – although for the moment it looks more like an elephant.
Figure 1: Total number of payrolled employees
29,500,000
29,000,000
28,500,000
28,000,000
27,500,000
27,000,000
Feb-16
Nov-16
Feb-17
Feb-18
Feb-19
Feb-20
Feb-21
Aug-15
Nov-15
Aug-16
Aug-17
Nov-17
Aug-18
Nov-18
Aug-19
Nov-19
Aug-20
Nov-20
May-15
May-16
May-17
May-18
May-19
May-20
May-21
Source: HMRC Pay As You Earn data
The LFS data is somewhat more subdued, with employment rising slightly on the quarter
to 75.2% (up from 75.0%) and unemployment ticking down slightly to 4.7%, but as Figure
2 shows, the trend in LFS employment in particular has been broadly flat since theInstitute for Employment Studies 3
autumn. In part this may be explained by definitional differences between the LFS and
PAYE sources, and in particular that the PAYE data excludes self-employment which has
fallen significantly in the crisis and is not yet recovering (covered in more detail on page
14). This in turn may in part reflect more self-employed workers counting themselves as
employees (or being counted in PAYE data as such), for example due to tax changes
implemented in April (‘IR35’). But it will also reflect the fact that the LFS data only covers
the period to April, as lockdown restrictions started to be eased – so we should expect to
see the LFS data start to recover more strongly in the coming months.
Figure 2: Employment and unemployment rates (16-64) – quarterly average with single-
month estimates
77.0 5.5
76.5
5.0
76.0
75.5 4.5
75.0
74.5 4.0
74.0
3.5
73.5
73.0 3.0
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Dec-16
Dec-17
Dec-18
Apr-19
Dec-19
Dec-20
Aug-16
Aug-17
Aug-18
Aug-19
Aug-20
Aug-16
Aug-17
Aug-18
Aug-19
Aug-20
Apr-16
Apr-17
Apr-18
Apr-19
Apr-20
Apr-21
Apr-16
Apr-17
Apr-18
Apr-20
Apr-21
Employment - quarterly average Unemployment - quarterly average
Employment - single month Unemployment - single month
Source: Labour Force Survey
Of more concern today is that the economic inactivity rate (which measures those not
looking and/ or not available for work) remains unchanged and very high at 21.0% -
broadly the rate that it has been since the start of the crisis. As with last month, this
continues to be driven by large rises in the number of economically inactive students, and
people inactive for ‘other’ (likely pandemic related) reasons. In particular the number of
young people in full time education but economically inactive has hit its highest ever level
of 2.2 million – up by 300 thousand during the crisis. At the same time there have been
significant falls in economic inactivity due to looking after family and home, particularly
among women.
Figure 3 below shows in more detail the percentage point changes in the rates of
employment, unemployment and inactivity over the first quarter of 2021 (in yellow) and
over the previous eleven months of the crisis. As the labour market continues to improve,
we should hope to see more of those who are ‘economically inactive’ starting to look for
work and so feeding through into both employment and unemployment.4 Labour Market Statistics, June 2021
Figure 3: Changes in employment, unemployment and economic inactivity: first eleven
months of the crisis (Dec-Feb 2020 to Nov-Jan 2021) and most recent quarter (Nov-Jan
2021 to Feb-Apr 2021)
Employment (16-64) Unemployment Inactivity (16-64)
1.5
Percentage point change in rate
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
First eleven months of crisis Most recent quarter (Feb-Apr 2021)
Source: Labour Force Survey
Job growth is being driven by new starts – and vacancy
data suggests more may be to come
The latest PAYE job starts and job exits data shows that the strong growth in employee
numbers in May was particularly driven by new hiring – with Figure 4 showing that this
surpassed 800 thousand (at 829k), which is the highest figure ever recorded. Note that
these figures are subject to monthly revision and are generally revised down, but even
with revisions this will undoubtedly be above pre-crisis levels. It should be noted that
these figures include job changers, so is not a measure of job entry for those out of work.Institute for Employment Studies 5
Figure 4: PAYE job starts and job exits, two years to May 2021
1,000,000
800,000
600,000
400,000
200,000
-200,000
-400,000
-600,000
-800,000
-1,000,000
-1,200,000
Jun-19
Jul-19
Jan-20
Mar-20
Jun-20
Jul-20
Jan-21
Mar-21
Nov-19
Dec-19
Feb-20
Nov-20
Dec-20
Feb-21
Aug-19
Sep-19
Aug-20
Sep-20
May-19
Oct-19
Apr-20
May-20
Oct-20
Apr-21
May-21
Inflows Outflows (inverted) Change in employees
Source: HMRC PAYE Real Time Information
The latest Vacancy Survey data also gives us more confidence that we will see further
improvement in the next few months, with the quarterly average for open vacancies back
close to pre-crisis levels, and the single-month estimate for May (the yellow line in Figure
5 below) reaching one of its highest levels ever, at 881 thousand.
More detailed analysis by industry suggests that virtually all industries have now seen
vacancies recover to close to or above pre-crisis levels (with retail and transport/ storage
the only exceptions). Accommodation and food services in particular has bounced back
strongly in recent months, rising from barely ten thousand open vacancies during recent
lockdowns to over 100 thousand in May. However with many employers reporting
recruitment difficulties, there are still well over two unemployed people for each live
vacancy – up from around 1.6 unemployed per vacancy before the crisis. So there should
still be scope to do much more to help those out of work to take up many of the new jobs
being created, and to work with firms to support more inclusive recruitment.6 Labour Market Statistics, June 2021
Figure 5: Vacancies – quarterly and single-month estimates
1,000,000
900,000
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
Three month average Single month estimate
Source: ONS Vacancy Survey
Despite these improvements, long-term unemployment
is continuing to rise
However as with recent months, even while the labour market is showing signs of
recovery we are seeing significant rises in long-term unemployment, which we define as
more than twelve months of unemployment for those aged over 25, and more than six
months for those aged 16-24. This is continuing to rise at its fastest since 2010 (up by two
fifths in the last year alone) and stands at its highest since autumn 2016. As Figure 6
below shows, these rises are now happening across age groups, (Note that this graph
uses LFS levels and so caution needs to be applied, although the general trend of rising
long-term unemployment is clear and is unlikely to be changed by any subsequent re-
weightings by ONS.)
As we have said previously, long-term unemployment should peak below the levels seen
in 2012 but is unlikely to do so for at least another year. Addressing this needs to be a top
labour market priority as the recovery gathers pace, particularly given the very high levels
of vacancies in the economy and many firms’ reported difficulties in filling jobs. The new
Restart programme for the long-term unemployed will have a key role to play, but so
should the Kickstart scheme – which needs to be re-focused on creating jobs for long-
term unemployed young people and extended until the peak has passed.Institute for Employment Studies 7
Figure 6: Long-term unemployment by age
600
500
400
Thousands
300
200
100
0
Oct-09
Apr-08
Oct-08
Oct-10
Oct-11
Oct-12
Oct-13
Oct-14
Oct-15
Oct-16
Oct-17
Oct-18
Oct-19
Oct-20
Apr-09
Apr-10
Apr-11
Apr-12
Apr-13
Apr-14
Apr-15
Apr-16
Apr-17
Apr-18
Apr-19
Apr-20
Apr-21
Quarter ending
16-24 (6 months+) 25-49 (12 months+) 50 and over (12 months+)
Source: Labour Force Survey. Long-term unemployment is defined as unemployment of more than six
months for young people, or more than twelve months for those aged 25 and over.
At last, there are signs that young people are starting to
benefit as ‘job rich’ sectors start to reopen
The pandemic’s impacts on the labour market have been characterised by young people
seeing by far the largest falls in (PAYE) employment during the crisis and none of the
benefits as things have recovered. However for the first time today, there are signs of this
starting to reverse – with young people accounting for nearly half of (90 thousand) of the
growth in employment in the last month. This has started to reverse the near-half-a-million
fall in employment during the crisis, but there is clearly still a long way to go. Figure 7
illustrates this, showing impact by age when employment overall was falling (between
February and November) and over the last six months as it has started to rise. Overall,
there remain nearly 13% fewer young people in employee jobs compared with about 1.5%
fewer people aged 25 and over.8 Labour Market Statistics, June 2021
Figure 7: Change in payrolled employees by age: first nine months of the crisis (Feb-Nov
2020) and most recent six months (Nov 2020-May 2021)
Under 18 18-24 25-34 35-49 50-64 65+
50,000 5%
0%
-50,000 -5%
-100,000 -10%
-150,000 -15%
-200,000 -20%
-250,000 -25%
-300,000 -30%
-350,000 -35%
Feb 20-Nov 20 Nov 20-May 21 % change Feb 20-May 21 (RHS)
Source: PAYE Real Time Information
Job gains and losses by industry again reflect the
impacts of the pandemic, lockdowns and reopening
As with previous months, changes in PAYE employment by industry show that the losses
during the first nine months of the crisis (February to November 2020) were driven by
shutdown sectors like hospitality, retail, manufacturing and the arts; while the gains since
November appear to be driven by pandemic related jobs (this is shown in Figure 8 below).
Health and public services stand out, while administrative and support jobs (the largest
contributor to jobs growth) includes contracted-out work in call centres, administrative
services, and packaging and logistics and so likely reflects both NHS Test and Trace and
online retail.
For the most recent month of May however, we are also starting to see tentative signs of
recovery in those sectors that were previously shut down – with employment in every
sector stable or rising, while accommodation and food services (which encompasses
many hospitality jobs) and admin and support services account for about a quarter of the
single-month jobs growth each. But again there is a long way still to go in regaining the
ground lost in hospitality in particular (where employment is around one sixth below pre-
crisis levels).Institute for Employment Studies 9 Figure 8: Changes in payrolled employment by industry – February to November 2020 (top panel) and November 2020 to May 2021 (bottom panel) Source: IES analysis of PAYE Real Time Information
10 Labour Market Statistics, June 2021 The recovery appears to be geographically fairly broad based, but London has a lot of ground to make up PAYE data for sub-regions (NUTS 2 areas) also tells a similar story to last month, with employment growth spread fairly evenly across the country. This means that employment in London has at least stopped falling, but having been hit twice as hard last year it has a lot of ground to make up. The reasons for this have been set out in previous briefings, but the continued prevalence of the virus means that prospects for a strong recovery in the capital remain uncertain – given the higher volumes of employment in office work, support services, the visitor economy, arts and aviation. With this relatively broad based recovery, we are now within touching distance of PAYE employment getting back up above pre-crisis levels (i.e. back to its highest levels area) across parts of the North East, North West, South West and in Northern Ireland (as Figure 9 below shows). It should be reiterated though that these data do not include self- employment, which remains well below pre-crisis levels.
Institute for Employment Studies 11 Figure 9 Percentage change in payrolled employees by NUTS 2 geographical area, February to November 2020 and November 2020 to May 2021 Source: IES analysis of HMRC PAYE data Employment growth is being driven by full-time work – with part-time work falling at its fastest rate on record Today’s figures also continue to show a significant shift away from part-time work and towards full-time employment, particularly among women. This data uses LFS levels and so should be treated with caution, but while both part-time and full-time work appear to have fallen by roughly equal amounts for men (each down by around 200 thousand),
12 Labour Market Statistics, June 2021
there are over 600 thousand fewer women in part-time work than before the crisis and
nearly 500 thousand more full-time workers. This has pushed part-time employment for
women to its lowest ever as a share of employment (at 37%) while for men it has dropped
back to levels last seen in 2009 (Figure 10 below).
Figure 10: Proportion of those in work who are working part time, by gender
16% 46%
14% 44%
12% 42%
10% 40%
8% 38%
6% 36%
4% 34%
2% 32%
0% 30%
Apr-97
Apr-99
Apr-05
Apr-93
Apr-95
Apr-99
Apr-01
Apr-03
Apr-05
Apr-07
Apr-09
Apr-11
Apr-13
Apr-15
Apr-17
Apr-19
Apr-21
Apr-93
Apr-95
Apr-97
Apr-01
Apr-03
Apr-07
Apr-09
Apr-11
Apr-13
Apr-15
Apr-17
Apr-19
Apr-21
Men Women
Source: IES analysis of Labour Force Survey
Rising full-time and falling part-time employment could of course be a good sign if it
means that more people are getting more of the hours that they want, but the data do not
suggest that this is what we are seeing now. In fact, the number who are working part-
time because they couldn’t find full-time work has risen during the crisis even as part-time
employment overall has declined (shown in Figure 11 below). The rise has been greater
for men that women, but it has risen for both. Figure 11 also shows that the number of
people in temporary work because they couldn’t find a permanent job is also rising, to its
highest in five years.
So it appears likely that at least part of the fall in part-time work is being driven by people
taking on longer hours through necessity rather than choice – for example because they
work in frontline roles like health services, or because they need to make up for lost
earnings from a partner. However our analysis for the Timewise Foundation, published
last week, suggests that the fall is also being driven by people leaving employment
altogether, with part-time workers more likely to be in low paid and insecure work, more
likely to lose work and income during lockdowns and less likely to have benefited as
restrictions have eased. Far from heralding a new era of flexible working, this recovery
may see far fewer people getting the hours and the flexibility that they need.Institute for Employment Studies 13
Figure 11: People in part-time work because they couldn’t find a full-time job, or temporary
work because they couldn’t find a permanent one
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
Apr-08
Oct-08
Apr-09
Oct-09
Apr-10
Oct-10
Apr-11
Oct-11
Apr-12
Oct-12
Apr-13
Oct-13
Apr-14
Oct-14
Apr-15
Oct-15
Apr-16
Oct-16
Apr-17
Oct-17
Apr-18
Oct-18
Apr-19
Oct-19
Apr-20
Oct-20
Apr-21
Quarter ending
Involuntary part-time Involuntary temporary
Source: Labour Force Survey
As noted in previous briefings and earlier in this note, the crisis has also seen a clear shift
away from self-employment and towards employee status – with the share of those in
work who are self-employed now standing at 13.4%. This has now been broadly
unchanged for the last three months of data, so it may signal that the large falls in self-
employment may have stopped, although there is not much sign yet that it is starting to
recover (Figure 12).14 Labour Market Statistics, June 2021
Figure 12: Share of those in work who are self-employed
15.5%
Proportion of those in work
15.0%
14.5%
14.0%
13.5%
13.0%
Apr-11
Apr-14
Apr-17
Apr-09
Oct-09
Apr-10
Oct-10
Oct-11
Apr-12
Oct-12
Apr-13
Oct-13
Oct-14
Apr-15
Oct-15
Apr-16
Oct-16
Oct-17
Apr-18
Oct-18
Apr-19
Oct-19
Apr-20
Oct-20
Apr-21
Quarter ending
Source: Labour Force Survey
Redundancies are now returning to pre-crisis levels
Finally, today’s data confirms that redundancies are on track to return to pre-crisis levels.
Figure 13 below shows the level of quarterly redundancies alongside the number of jobs
notified by employers as being at risk of redundancy in HR1 forms sent to the Insolvency
Service. The most recent LFS figures show a sharp fall, and so are now more clearly
following the (lagged) trend of the HR1 data. Note that these are changes in LFS levels
and so need to be used with caution, but redundancy rates show the same trend.
The most recent weekly data, in Figure 14 below, show even more clearly that
redundancies falling back to pre-crisis levels during March – with on average 130
thousand people each week reporting that they were laid off in the previous three months.
There are no signs in either the HR1 or LFS data that redundancies are going to pick up
in the near future.Institute for Employment Studies 15
Figure 13: Quarterly number of employees notified as at risk of redundancy (HR1 forms)
and reporting having been made redundant (Labour Force Survey)
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Sep-10
May-08
Sep-08
Sep-09
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
May-16
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
May-09
May-10
May-11
May-12
May-13
May-14
May-15
May-17
May-18
May-19
May-20
May-21
Quarter ending
HR1 at risk of redundancy LFS redundancies
Source: IES analysis of Insolvency Service and Labour Force Survey data
Figure 14: Whether made redundant in previous three months – weekly responses, April
2020 to April 2021
600,000
500,000
400,000
300,000
200,000
100,000
0
Source: Weekly Labour Force Survey X0716 Labour Market Statistics, June 2021
Conclusion
Today’s data continues a run of very positive labour market indicators over recent
months, with strong growth in vacancies and PAYE employment, a small fall in the
unemployment rate and signs of recovery across age groups, industries and areas. The
LFS data remains a bit more subdued than might have been expected, which may just
reflect timing differences and sampling, but may also point to some definitional differences
with the PAYE sources, particularly around treatment of self-employment. Economic
inactivity also remains very high, driven particularly by students.
Nonetheless as with last month, there are clear warning signs that the longer-term ‘scars’
of the crisis will be felt in rising long-term unemployment, and that many people who are
staying in or finding new work may not be getting the hours and security that they need.
So looking ahead, with Jobcentre Plus getting back to normal running and the £7 billion
investment in new employment support starting to come on stream, we need to:
■ Mobilise support for those out of work as quickly as possible, particularly through
Jobcentre Plus and the Restart programme;
■ Target support much better at those further from work and longer-term unemployed,
including by reforming and extending Kickstart to focus on creating transitional jobs for
long-term unemployed young people; and
■ We work much better with employers – across services – to help advertise jobs with
the shift patterns, entry requirements, skills support, hours and pay that will enable
those who are out of work and want to work to take them up.
About IES
The Institute for Employment studies is an independent, apolitical centre of research and consultancy in
employment policy and human resource management. It works with employers, government departments,
agencies and professional and employee bodies to support sustained improvements in employment policy
and practice.
Institute for Employment Studies, City Gate, 185 Dyke Road, Brighton, BN3 1TL United Kingdom
www.employment-studies.co.uk
@EmploymtStudies
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