Lockdown triggers biggest fall in jobs since the crash

The number of people who have lost their jobs in Britain since the lockdown in March has now reached 730,000 – the biggest fall in employment since the financial crash.

Led by a record fall in the self-employed, the number of those in work dropped by 220,000 in the three months to June, the biggest quarterly fall since the May to July period in 2009.

Not surprisingly, there was a record fall of 238,000 people registering as self-employed to 4.76 million, which represents 14.5% of all people in employment. And the total hours that people worked is down by a fifth to the lowest level since 1994.

According to the latest figures today from the Office of National Statistics it is the young and the old, and those in routine and manual occupations, who have suffered the most so far during the pandemic.

While the UK was put into deep freeze for the three-month lockdown, the overall unemployment level has not risen as sharply as many feared because of the government jobs retention scheme.

Overall, the unemployment level is still 3.9%, hardly changed over the last year. As the ONS explains, this reflects that many people have given up looking for work and are therefore not considered as unemployed, while 300,000 people are working but not being paid. They also do not take into account those on zero-hours who are now on zero-work.

What the latest numbers suggest is that firms have reduced hiring rather than firing permanent staff, for now.

But the fear is that there will be a jobs massacre once the furlough scheme comes to an end in October, when companies take a hard look at their permanent staff and start cutting hard.

Up to nine million people are being protected by the government-backed job retention scheme and one in three of all private sector workers are being supported by the taxpayer.

In July alone another 140,000 redundancies have been announced, mainly in the hospitality business and among retailers. Already on life support before the pandemic, Debenham’s is to cut another 2,000 jobs.

Also out today were figures showing that the number of people claiming universal credit, which covers those on low pay as well as the unemployed, jumped to 2.7 million in July, up 117% since March.

The government knows that it is taking a huge gamble by winding down the scheme in October but fears that extending income support will cripple the economy because of the enormous cost.

On hearing the latest figures, Johnson said parts of the economy were showing great resilience but added: “Clearly there are going to be bumpy months ahead and a long, long way to go.”

The Chancellor, Rishi Sunak, who announced the £40 billion job retention scheme within days of the March lockdown, has admitted he agonised over calling an end to the scheme but felt it was right to not “pretend” that there would not be job losses. Despite calls from the opposition and some economists to prolong furlough, Sunak has remained adamant the cost to the taxpayer is too great to keep going.

If the job numbers continue rising at this level, some say Sunak may be persuaded to think again. But that seems unlikely.

Investors don’t appear to take that view either and are looking ahead. In London, the FTSE 100 was up over a 100 points at its highest level for two weeks at 6154 while the FTSE 250 – more representative of UK companies – rose 1.54% to 17,997.18. Across Europe, stock markets showed even better gains on the latest hopes that the Russians have approved a vaccine and signs of a new financial stimulus package from President Trump.

Across the Atlantic, financial markets went into a tizzy after Trump said – again – that he is considering cutting capital gains taxes to revive the economy (that’s one of Trump’s few good ideas that Sunak should be looking at, too.)

Together with the vaccine news and Trump’s tweets that he is getting excited about markets again, investors raced back into stocks – particularly tech companies. Whichever it was they were excited about the most, it was enough to send the S&P 500 index to within a whisker of the record highs last seen mid-February before the pandemic struck. The Dow Jones was also up another 200 points.

Oh, and the traders say they like the news that the polls are tightening on Joe Biden’s lead.