All economic arrows are pointing in the wrong direction

The economy has been hit by the biggest downturn in living memory but, officially, the unemployment rate remains 3.9 per cent - a record low. Something is clearly amiss.

Lockdown, recession, emergency support from government. The speed and scale at which things have moved is dizzying.

The official data always runs at least a month behind what is happening. Now, even more than usual, it feels horribly off the pace.

  • Joel Hills speaks live on Tuesday's News at Ten from west London:

The latest disclosures from the Office for National Statistics (ONS) reinforce what we know already: It’s grim but would be a lot worse were it not for the government’s Job Retention Scheme (JRS), which has, so far, succeeded in preventing mass redundancies.

In May, 28.4 million people were registered on payrolls, a fall of 612,000 since March. Given the scale of the recession we’re in, that’s pretty remarkable.

The number of people reporting they are “temporarily away from a job” has risen by six million since the lockdown began.

Crudely put, it would appear that the number of people who have been furloughed is ten times higher than the number of people who have left employment. The total number of weekly hours worked has slumped.

The furlough scheme has so far preserved 9.1 million jobs which may otherwise have disappeared. Getting on for 1 in 3 workers are being paid not to work. This cannot last and it won’t.

Taxpayer support will tail off from August. Unemployment will rise sharply if only a small fraction of employers decide they cannot afford to bring people back.

The number of employees on payroll has fallen in recent months, ONS figures show. Credit: ONS

The claimant count has more than doubled between March and May. The government has widened eligibility but that is still a measure of very considerable financial distress.

Currently, 2.8 million people people are receiving benefits. Many are unemployed, an unknown number are “in-work” but receiving help because either their income or their hours have fallen.

Pay is under pressure too. Furloughed workers receive 80 per cent of their usual wages but average total pay (including bonuses) across the economy is falling in real terms for the first time since 2018.

Graphic showing the number of those temporarily away from a job. Credit: ONS

The collapse in job vacancies means those who lose their jobs in the months to come will find getting back into employment tough.

In March there were 754,000 vacancies in the economy. In May there were 318,000, a record low. Although the ONS says the Real Time Information it gathers from online job adverts suggest things have picked-up a little since.

The Government's Job Retention scheme has helped saved some jobs, writes Joel Hills. Credit: PA

Politicians will interpret the data in different ways but the big picture is grim. All of the arrows are currently pointing in the wrong direction.

The lockdown is easing, companies are reopening, hiring should increase. The extent to which that happens will depend on the infection rate, how quickly restrictions lift and how people and businesses behave where they do.

Coronavirus: Everything you need to know