- Recruiters, administrators scramble for new jobs
- UK unemployment rate to rise to 7% says Oxford Economics
- Says consensus estimate of 8.4% unemployment rate too pessimistic
Image © Adobe Images
A leading online jobs portal is reporting a jump in job application volumes, confirming economist expectations for a surge in unemployment at the end of the month when the government's Jobs Retention Scheme (JRTS) ends.
The scheme - known as furlough - winds down in October and many companies are expected to let go staff who had seen their position temporarily subsidised by the government.
According to the latest quarterly job market report from CV-Library, a leading independent job board, job applications grew by 33.9% in the third quarter of 2020 and by 9.2% year-on-year. The data provides a timely leading indicator on where the labour market is headed at this juncture.
The report looks at job market data throughout the third quarter of 2020 and compares this with findings from the previous year.
It reveals that the following industries saw the highest growth in applications quarter-on-quarter:
- Administration (up 90.2%)
- Recruitment (up 85.5%)
- Marketing (up 78.6%)
- Sales (up 77.7%)
- Telecoms (up 74.6%)
- Legal (up 61.5%)
- Finance (up 58.6%)
- Education (up 51.5%)
- Electronics (up 46.9%)
- Construction (up 44.5%)
The data also reveals that the number of job postings has increased by 79.1% between the second and third quarters, however the number of roles advertised between July and September is still some 30.4% lower than at the start of the year.
According to official data from the ONS out earlier in October, the UK's labour market showed some signs of life in late summer as the economy continued to recover from lockdown, but not enough to reverse the damage done by earlier coronavirus containment efforts.
And with the economy now slowing again as more virus-related restrictions come into effect, some economists are warning of a perfect winter storm ahead for the labour market.
CV-Library data showed that as vacancies continued to rise during the third quarter, the number of applications per vacancy dropped by 25.2%, however this is still 78.8% higher than during the same period last year.
"This data clearly shows that the UK job market has started to recover from the national lockdown in March, but we still have a long way to go. However, it’s likely that this new found confidence may be short lived," says Lee Biggins, founder and CEO of CV-Library. "The uncertainty surrounding future government restrictions, as well as those put in place last week will force businesses to put a freeze on their hiring plans. Sadly, this will coincide with the end of the original Job Retention Scheme, which may spell bad news for professionals."
Analysis from Oxford Economics shows the UK unemployment rate could rise substantially over coming months.
"Tightening coronavirus restrictions, which will likely put the recovery on hold, plus limitations of the Job Support Scheme are damaging the jobs outlook. We now expect the unemployment rate to peak at just over 7% early next year," says Martin Beck, Lead UK Economist at Oxford Economics.
The official measure of unemployment rose from 3.9% to 4.1% in August according to the ONS.
"We expect a wave of layoffs across the UK to push the unemployment rate temporarily above 8.0% during Q4 2020, falling thereafter in line with the economic rebound," says Kallum Pickering, a senior economist at Berenberg Bank.
While the furlough scheme comes to an end in October, the Chancellor on October 09 announced the JRTS would be extended beyond October for those companies impacted by new closures.
The scheme sees the government pay two thirds of employees’ salaries "to protect jobs over the coming months".
While it is a less generous offer than the initial JRTS it will still provide something of a cushion to the labour force.
"We remain less bearish than the consensus. The expanded Job Support Scheme should protect some jobs, and some employers may cut hours and wages rather than lay-off staff. Also, a proportion of foreign workers who lose their jobs may leave the UK, mitigating the rise in unemployment," says Beck.
Consensus estimates amongst economists is that the UK unemployment rate will rise to 8.3% in the fourth quarter of 2020.
Oxford Economics are less pessimistic on the outlook for the jobs market than the majority of economists for two reasons:
1) Shedding workers has a cost to employers, both financial, in the form of redundancy payments (where workers are eligible) and by damaging the morale of remaining employees
2) Restrictions imposed in response to the Covid crisis will at some point end, whether through the development of a vaccine or acceptance that the virus is
something we have to live with.
"Firms may decide it makes more sense to retain staff, perhaps through cutting pay or hours, rather than going through the cost and trouble of losing workers now only to have to find new employees a few months later," says Beck.
Achieve 3-5% More Currency: The Global Reach Best Exchange Rate Guarantee maximises your currency purchasing power. Find out more.
Invest in Spanish Property. A selection of discounted properties due to the covid-19 crisis, online viewings and transactions possible. Download the Guide
Invest in Portuguese Property. A selection of discounted properties, online viewings and transactions possible. Download the Guide