The impacts of the coronavirus crisis on the labour market

Analysis of quarterly Labour Force Survey data

This paper sets out analysis of the impacts of the Covid-19 pandemic, using quarterly and longitudinal Labour Force Survey data covering the period from July to September 2020. It focuses in particular on: understanding which jobs and groups have been most likely to be away from work, working fewer hours, or to have left work; what is driving the growth in economic inactivity since the crisis began; and which sectors and occupations are shrinking and growing most strongly through the crisis.

We find that:

■   5.2 million workers – one in six of the workforce – were still away from work or working fewer hours at the end of September.

■   While much attention has focused on furlough, 1.6 million people were working fewer hours than normal at the end of September – this is nearly three times higher than the fall in employment so far (of 570 thousand)

■   There are clear sectoral and occupational differences in work disruption and recovery – with ‘shutdown’ sectors inevitably most affected by the crisis, but skilled trades appearing to be better protected from job losses while those in the lowest skilled work have been at highest risk both of leaving work and having their jobs disrupted

■   There are clear signs that jobs are being lost in relatively lower paying work and gained in higher paying work. Employment has fallen most strongly in food services, food manufacturing, residential care and construction.

■   Food-related employment explains more than half of the fall in employment, while food manufacturing explains all of the fall in manufacturing jobs. Nearly three fifths of the fall in employment can be explained by declines in the lowest skilled, elementary occupations.

■   Jobs growth is being driven by service industries and in particular public services, finance and technology. Relatively more highly skilled professional jobs in business and public services have increased by a quarter of a million.

■   However while employment in health services has increased, employment of health professionals appears to have fallen slightly, suggesting that the increase is being driven by administrative and managerial roles, almost certainly in pandemic related jobs like NHS Test and Trace.

■   While the clear shift from lower to higher skilled work could be seen in positive terms, there are some potentially worrying indications that this could widen inequalities in the labour market – with in particular ethnic minority groups more likely to lose their jobs in shrinking sectors and occupations and less likely to gain jobs in growing ones.

■   The very youngest and very oldest also appear to have seen the most significant impacts from the crisis. Young people have been the most likely to leave work or to have work disrupted throughout the crisis, but at the same time those young people affected during the first lockdown were more likely than other groups to return to normal working over the summer.

■   Meanwhile workers aged over 50 who were away from work or working reduced hours were the least likely to move back into normal working after the first lockdown ended.

■   The pandemic has seen sharp rises in economic inactivity, but this disguises different trends for different groups – with a long-running increase due to long-term ill health, particularly since the crisis began amongst older people; while inactivity has fallen for those looking after their family or home.

■   The rise in inactivity for ‘other’ reasons appears to be being driven by the youngest and oldest, likely reflecting pandemic specific factors and with a majority wanting to work. In the coming months this will almost certainly feed through into rising unemployment.

Looking ahead, we are likely to still be in the foothills of the labour market impacts of this crisis, with much of the effects so far being muted through the support measures introduced to protect jobs, and much of the growth in employment reflecting emergency public spending to deal with the pandemic. However this analysis points to four potential priorities for our labour market response in 2021.

1. A far greater focus on how we support those who are likely to be most disadvantaged in the labour market and on narrowing inequalities between different groups – in particular for ethnic minority groups, disabled people, those with long term health conditions, older people and women.
2. To take more account of the impacts of the crisis on those in the lowest paid, least secure and lowest skilled work, and those seeing their hours reduced. This should include introducing the previously announced Job Support Scheme, to better support those working reduced hours but not fully furloughed; and improving access to employment support for those in low paid work.
3. More support those affected by the crisis to move into sectors and occupations that are growing, with in particular a greater focus on retraining support (which has been notable by its relative absence so far) and a greater targeting of this on those most at risk in the crisis.
4. Measures to support new hiring in the new year, as the Job Retention Scheme begins to wind down and pandemic-related public spending is scaled back. This should include measures to reduce hiring costs for employers, and potentially new hiring subsidies for taking on those who have previously been unemployed.