UK graduate labour market update: 04 January

Prospects' head of higher education intelligence, Charlie Ball, provides his regular update on the impact of the COVID-19 recession on the graduate labour market

Hello everyone, and welcome to 2021. Here we are again with another round-up of UK graduate labour market news.

This week's news and reports

The ONS issued their December labour market update on the 15th December.

• The UK employment rate, in the three months to October 2020, was estimated at 75.2%, 0.9 percentage points lower than a year earlier and 0.5 percentage points lower than the previous quarter.
• The UK unemployment rate, in the three months to October 2020, was estimated at 4.9%, 1.2 percentage points higher than a year earlier and 0.7 percentage points higher than the previous quarter.
• Redundancies reached 370,000 in the three months to October 2020, an increase of 217,000 on the quarter, although the number of redundancies fell slightly in October 2020.
• Early estimates for November 2020 indicate that the number of payrolled employees fell by 2.7% compared with November 2019, which is a fall of 781,000 employees; since February 2020, 819,000 fewer people were in payrolled employment.
• The claimant count increased slightly in November 2020, to 2.7 million; this includes both those working with low income or hours and those who are not working.
• There were an estimated 547,000 vacancies in the UK in September to November 2020; this is 251,000 fewer than a year ago and 110,000 more than the previous quarter.
• Retail and IT saw the biggest quarterly rises in vacancies.
• The unemployment rate for 16 to 24 year olds was 14.5%.

Labour market data is here.

The Scottish briefing is here

• Scotland's unemployment rate decreased over the quarter (0.6 percentage points) and increased over the year (0.6 percentage points) to 4.2%. Scotland's unemployment rate was below the UK rate of 4.9%.
• The proportion of people aged 16 to 64 in work increased over the quarter (1.4 percentage points) and increased over the year (0.3 percentage points) to 74.8%. Scotland's employment rate was below the UK rate of 75.2%.
• The economic inactivity rate (the proportion of people aged 16 to 64 years who were not working and not seeking or available to work) decreased over the quarter (0.9 percentage points) and decreased over the year (0.8 percentage points) to 21.8%. Scotland's inactivity rate is above the UK rate of 20.8%. Early estimates for November 2020 from HMRC Pay As You Earn Real Time Information indicate that there were 2.3 million payrolled employees in Scotland, a decrease of 3.1% (74,000) compared to the same month the year before.

The view from the Senedd is here.

• For August 2020 to October 2020 the unemployment rate for people aged 16+ in Wales was 4.6%, compared to 3.2% in the previous quarter (May 2020 to July 2020). This is an increase of 22,000 people from the previous quarter up to 70,000.
• The unemployment rate in Wales (4.6%) is lower than England (5.1%) but higher than Scotland (4.2%) and Northern Ireland (3.9%).
• The latest data for November 2020 shows that the claimant count in Wales went up from 58,576 in March 2020 to 114,194 in November 2020, a slight increase from 112,481 in October 2020.
• For the 12 months to June 2020 Swansea West had the highest unemployment rate (6.7%) by Welsh constituency and Carmarthen West and South Pembrokeshire the lowest rate (1.2%).

The Northern Irish analysis is here.

•  The number of people on the NI claimant count increased over the month to 59,900 in  November 2020. This is more than double the number recorded in March.
• There were 1,370 proposed redundancies in November 2020 and 340 proposed between 1 and 11 December.
• From 1 December 2019 to 30 November 2020, 10,720 redundancies were proposed, the highest annual total since records began. 
• The NI unemployment rate (16+) increased over the quarter (0.9pps) and the year (1.6pps) to 3.9% in August to October 2020.
• The NI unemployment rate was below the UK rate (4.9%), the Republic of Ireland rate (7.3%) and the EU (27) rate (7.5%).
• Employee jobs decreased over both the quarter and the year to 775,020 jobs. September 2020 marked the third consecutive quarterly decrease in employee jobs. The quarterly decline in September 2020 was driven by decreases within the manufacturing, services and 'other' industry sectors. The annual decrease was the first annual decline since September 2012, and was driven by decreases in the manufacturing (-2,930 jobs) and services (-2,760 jobs) sectors. The manufacturing sector has experienced five consecutive quarters of decline since the peak in June 2019.

As always the House of Commons Library has summarised the current state of proceedings.

The Centre for Cities have updated their unemployment tracker with the new data.

Meanwhile the ONS also updated their weekly roundup of the social and economic effects of pandemic on the UK on 23rd December.

According to Adzuna, in the week ending 18 December 2020, the volume of online job adverts increased by 9 percentage points from the previous week to 83% of levels compared with the same time last year. Job adverts increased across all categories and regions compared with the previous week.

And on 17 December the ONS published data on the impact of COVID-19 and Brexit on business.

• 29.4% of the workforce was working remotely, rising to 78.9% of the IT industry and 67.9% of the workforces of businesses in professional services and scientific activity.
• 43% of businesses in the accommodation and food service activities industry were temporarily closed or paused trading, compared with 17% across all industries.
• The arts, entertainment and recreation industry and the other service activities industry (which includes hairdressing and other beauty treatment activities) had the next highest percentages of businesses temporarily closed or paused trading, at 35% and 30% respectively.
• The transportation and storage industry had the highest percentage of businesses that had permanently ceased trading, at 12%.
• Over three-quarters of businesses in the accommodation and food service activities industry experienced a decrease in turnover compared with normal expectations for this time of year.
• Across all industries, 3 in 10 businesses had less than three months' cash reserves, rising to over 50% of businesses in the other service activities industry.
• 3 in 10 businesses in the accommodation and food service activities industry had no or low confidence that they would survive the next three months, with 12% in the accommodation industry and 31% in the food and beverages service activities industry.
• The proportion of businesses' workforce on furlough leave was 16%, doubling from 8% at 5 to 18 October 2020.
• 53% of the workforce in the arts, entertainment and recreation industry were on partial or full furlough.
• Of businesses where preparedness for the end of the EU transition period is relevant, 20% of businesses are fully prepared, compared with 43% that are somewhat prepared and 12% that are not at all prepared; an additional 25% are not sure if they are prepared for the end of the EU transition period.

The ONS also published data on the take-up of the furlough schemes up to the end of October, before the second lockdown.

• Since the peak of 8.9 million employments furloughed on 8 May, followed by reductions in June, figures show that the number of employments furloughed continued to fall throughout July, August and September to 5.4 million at 31 July and 3.8 million at 31 August and 2.8 million at 30 September. Latest figures show that the number of employments continued to fall throughout October to 2.4 million at 31 October.
• Furloughing of staff in the wholesale and retail sector peaked on 24 April at 1.9 million employments. At 31 October, there were 356,400 employments furloughed in this sector.
• As at 31 October, the sector with the highest proportion of its workforce eligible for furlough that were actually furloughed was the accommodation and food services sector at 27% followed by arts, entertainment and recreation at 24%. In all, 45% of employers in both the accommodation and food services sector and the arts, entertainment and recreation sector were using the furlough scheme at the end of October.
• Overall, where it was possible to link the data, across the UK, 1.19 million women were furloughed at 31 October compared with 1.14 million men. This is a decrease of 229,700 women and 210,400 men when compared to 30 September.
• There was a broad consistency in furlough rates across the nations and regions of the UK at the end of October. London had the highest take-up rate of 10% against the UK average of 8%.
• 196,400 employers had at least one employment on flexible furlough at the end of October. In total 977,200 employments were on flexible furlough at the end of October, 41% of all furloughed employments.

The Treasury have issued a comparison of independent forecasts for December 2020 and beyond.

• GDP is forecasted to have fallen by an average of 11.1%, and unemployment at the end of 2020 is forecast to be 5.9%.
• GDP is expected to grow by 5.4% in 2021 but unemployment to go up to 6.7%.

The Bank of England has a number of reports to consider.

The first is the quarterly Agent's Summary of Business Conditions.

• Employment intentions improved slightly, reflecting reports from many contacts that they had largely completed headcount adjustments. However, the outlook remains negative, and further job cuts are expected in retail, hospitality and leisure, and construction once the Government’s Job Retention Scheme unwinds. Nonetheless, there were a few reports of companies increasing staff numbers in certain sectors, such as pharmaceuticals, IT and professional services.
• Contacts reported that pay growth remained subdued. There were continued widespread reports of pay being frozen or settlements deferred. Bonus payments were also lower compared with a year ago. However, temporary pay cuts made earlier in the year have largely been reversed. Most contacts expected pay growth to be restrained in 2021.
• Recruitment difficulties have eased significantly, particularly in sectors worst affected by the pandemic. Contacts recruiting unskilled and junior staff reported an increase in the quantity and quality of applications. However, shortages persisted for highly skilled and experienced professionals, particularly in health and social care, IT, engineering, agriculture and finance. This was probably a reflection of the gap in skills between those sectors shedding labour and those wanting to recruit. Contacts said that lower staff turnover and EU nationals returning home might also be curbing the availability of labour.

Next we have the report from the Bank's Decision Maker Panel on the impact of pandemic on business in Q4.

• Although there was a marked improvement in reported sales from around -30% relative to what they would have been in the absence of Covid in 2020 Q2, respondents to the October DMP survey estimated that sales were still 17% lower than they otherwise would have been in 2020 Q3, while employment was 8% lower and investment 24% lower.
• In the November survey, only a modest further recovery in sales was expected in 2020 Q4, where sales were expected to be 15% lower than they would have been.
• However, further improvement was expected in the first half of 2021. Sales were only expected to be around 2% lower by 2021 Q2. Investment was also expected to recover, but more slowly and by less than sales.
• In November, businesses reported that their average unit costs were around 7% higher in 2020 Q4 due to Covid, and that they expected this impact to persist into next year.

And the Bank also produced a report on the impact of COVID on productivity.

This report is rather technical, but the findings can be summarised as follows:

• The Bank finds that COVID will lead to a productivity drop in the UK private sector by up to 5% in 2020 Q4 and by around 1% in 2022 and beyond.
• Businesses anticipate a large reduction in productivity within firms, partly because measures to contain Covid-19 are expected to increase intermediate costs.
• There will be a mixture of low productivity firms being replaced by higher productivity firms - and low productivity industries like accommodation, entertainment and travel have shrunk with limited offsetting expansion of other industries.
• In the longer run, Covid-19 has led to a large reduction in R&D expenditure by firms. There  are also issues around the efficacy of this R&D because of the difficulty of carrying out research under lockdown if scientists and engineers cannot physically access equipment.
• Covid-19 has also been extremely time consuming for senior managers with CEOs spending  about a third of their time directly dealing with the pandemic, which is time that has presumably been taken away in part from other longer-run productivity enhancing activities.
• It may also take time for these effects to become apparent and there may potentially be some additional longer run negative effects on productivity from diminished innovation and intangible investment by firms.

Indeed have published a brief 2020 labour market review and 2021 outlook.

• Coronavirus has dealt the labour market a heavy blow, but the furlough scheme has softened the impact.
• The unemployment rate has risen from under 4% at the start of the year to 4.9%, and the labour market is in even worse condition than that number suggests.
• Job losses are mounting and unemployment is set to rise over the coming months. Vacancies have staged only a partial recovery, making it harder for those who have lost jobs to get back into work.
• Job postings on Indeed's UK site are still running 37% below last year's trend.

EMSI published an interesting report on the growth in demand for remote workers in 2020.

• Although non-remote job postings still make up by far the bulk of all postings, demand for jobs that can be done remotely has risen by over 212%, while demand for non-remote jobs has risen by just 2.3%, after declining through much of the year.
• The list of jobs that can be done remotely, it is dominated by a number of IT-related roles, such as front-end developers, web developers and remote developers. However, there are also a number of other jobs for which demand grew noticeably as the year went on. For instance, there were less than 100 postings in Q1 for business representatives, yet by the end of November there had been over 5,000. Customer service representatives also grew massively during the year. They were not strongly demanded by employers in Q1, with 1,307 postings, but by the end of November it was the second most common advertised remote role with 14,193 job postings throughout the year - remote developers were the most common.

The Recruitment and Employment Confederation (REC) and Savanta ComRes have released their monthly Jobs Outlook

• The report found that employers' confidence in making hiring and investment decisions rose by six percentage points in the three months to November, compared to the previous rolling quarter. This put confidence levels at net: +1, returning to positive territory for the first time since January to March. However, their confidence in the wider UK economy fell by a further two points to net: -51.
• Employers' intentions to hire permanent staff have been improving since the summer. Demand for permanent workers in the short term (next three months) grew by six points to net: +20, while medium-term demand (four to twelve months) grew by five points to net: +22.
• An increasing number of firms have been looking to the support of temporary workers to see them through the run up to Christmas. Short-term demand for agency workers rose by five points from the previous rolling quarter to net: +6. Medium-term demand meanwhile rose by eight points to net: +12.
• Just 6% of employers surveyed believed that their business was fully prepared for Brexit in November.

REC also produced an analysis of the state of the recruitment industry itself

• Recruiters' direct contribution to the UK economy reached £42.3 billion in 2019, accounting for 2.1% of UK Gross Value Added (GVA).
• Of the £42.3 billion contributed to the economy, £37.8 billion (89%) was achieved through temporary/contract placement activity, and £4.5 billion (11%) was achieved through permanent placements activity.
• REC estimates that COVID-19 has resulted in a 22% drop in direct GVA in between March and September, including a 19% reduction in permanent placements compared to 2019.
• This number may grow due to March and April placements reflecting pre-pandemic work, and a longer recovery path for permanent placements, as indicated by other REC surveys.
• There was a 30% drop in the number of temporary/contract workers on assignment each day, year-on-year.
• The industry made 1,008,000 permanent placements in 2019, only slightly lower than in the 2018/19 financial year 1,070,000. On any given day in 2019 985,300 workers were on temporary and contract assignments.
• The number of people employed in the recruitment industry in 2019 remained stable at 119,000.
• 81% of the 31,000 recruitment enterprises in the UK are micro-businesses, with fewer than 10 employees - though this year's survey shows some evidence of consolidation.
• The majority of client businesses said they were satisfied with both the candidates supplied by their recruitment partners (68%) and the recruiters' overall service (71%).

REC also produced their regular Report on Jobs survey, with KPMG

The report is compiled by IHS Markit from responses to questionnaires sent to a panel of around 400 UK recruitment and employment consultancies.

• November survey data revealed a second successive monthly drop in overall demand for staff across the UK, driven by a steep decline in permanent vacancies. Demand for temporary staff rose for the fourth month in a row, although the rate of increase is slowing.
• The availability of both permanent and temporary staff continued to rise in November.
• Permanent starters' salaries declined again in November. Temp pay also declined, albeit modestly.
• Permanent placements fell across all four monitored English regions in November. The steepest reduction was seen in London.
• All four monitored English regions except London registered higher temp billings midway through the fourth quarter. The Midlands noted the fastest expansion.
• November survey data signalled a renewed fall in permanent private sector vacancies. At the same time, growth of temporary roles in the private sector weakened. In the public sector, permanent positions also fell sharply, while demand for short-term staff rose modestly.
• Only two of the ten monitored job categories registered higher demand for permanent workers in November, namely IT & Computing and Engineering.

The CIPD have produced a report on the impact of pandemic on the youth labour market.

• The report finds that 62% of businesses had recruited a young person in the last 12 months, but just 46% were planning to do so in the next 12 months.
• Employers report a fall in the provision of all types of work experience placements in the next 12 months compared with the previous year, with largest falls for internships and placements for school students.
• There is also a high degree of uncertainty, given the current context, on plans for recruitment and provision of work experience in next 12 months.
• 8% of organisations reported that they had a good knowledge of traineeships and just 9% of employers had someone undertake one in their organisation.
• 57% of medium-sized employers had not provided any apprenticeships in the last 12 months, rising to almost 80% of small employers.
• Incentives to boost the provision of apprenticeships and traineeships do not appear to be large enough to shift employer behaviour - when asked about the impact of apprenticeship incentives, just 5% of employers that were not planning to recruit apprentices responded that they were considering it now. 8% of organisations that were not planning to offer traineeships before were considering doing so now.
• Just under a third (32%) of employers are either very interested (8%) or somewhat interested (24%) in providing a Kickstart placement. Large and medium organisations were slightly more likely to report that they are either very or somewhat interested (34% and 39% respectively) than small organisations (26%).
• Level of interest also varies by sector, with employers in the third/voluntary sector more likely to report being very/somewhat interested (41%), compared with employers in the private (33%) and public sector (28%).

The Fabian Society have released the final report of a lengthy consultation, The Commission on Workers and Technology, on technological change and automation.

• Jobs have been saved during the Covid-19 crisis because of new technologies: Without the capacity of technology to allow businesses to adapt and people to work remotely, the economic consequences of the pandemic would have been much greater
• The Covid-19 crisis is set to accelerate job-replacing automation. Past recessions have accelerated automation, replacing human tasks with technology, and there is already evidence that this is happening again during the Covid-19 recession. Sectors including hospitality and retail face a 'double whammy' because they are being hit by Covid-19 restrictions now and also have the most job tasks that can be automated. 61% of furloughed jobs were in sectors where there is a high risk of jobs being replaced by automation. This is particularly concerning because these sectors are key recruiters for young and unemployed people.
• There is a sharp disparity between the workers who are benefiting from technological trends linked to the crisis and those who are being hit. During the spring 2020 lockdown, 42% of employees in the bottom earnings quintile were furloughed, lost their job or worked fewer hours, compared to under 15% in the highest quintile. Low-paid and disadvantaged workers are also much more likely to work in jobs at high risk of automation with women, younger and older workers, people from minority ethnic backgrounds and disabled workers more likely to lose out.
• Some places will also be affected more severely by the combination of Covid-19 and automation than others. The prospects for city centres over the coming months look difficult as office workers and customers stay away. But most of the English local authority areas most vulnerable to the combination of Covid-19 and automation over the medium term are made up of towns and smaller communities (25 out of 28 areas). Places with less resilient, less skilled and less diverse labour markets, and concentrations of employment in high-risk sectors, may end up suffering most in the long term.
• People that need most help receive least: Employees with a degree or equivalent higher qualification are almost four times as likely to have recently received training at work as employees with no qualification at all. A survey for the commission also found that people with degrees are much more likely to be offered training to prepare for technology changes compared to people educated to GCSE level.
• Flexible working, most notably remote working and working from home, has become an option for more and more people because of the proliferation of inexpensive, secure systems to link together employees with their employers.
• However, tech-enabled flexibility can come with significant drawbacks for workers including the proliferation of precarious working contracts, increasing work related stress, and social isolation. New forms of flexibility involving self-employment or atomised 'gigs' too often come at the expense of social protections associated with more traditional kinds of employment including statutory and contractual employment rights and the support of trade unions.
• New technology is relieving workers of repetitive, strenuous or dangerous tasks, so that they can spend a higher share of their time adding value, with more interesting, creative or human-focused tasks. Workers also told the Society that appropriate use of technology can lead to fairer, more transparent management decisions.

The most recent ONS data on apprenticeships and traineeships was released on 17 December.

• Higher apprenticeships accounted for over a quarter of starts (25.6% or 82,500 starts) while Intermediate and Advanced apprenticeships accounted for 74.4% of starts (240,100).
• Under 19s accounted for 23.6% of starts; 19-24s for 29.5% and those aged 25+ made up 46.8%
• Apprenticeship standards made up nearly three-quarters of starts (240,700).
• Starts supported by Apprenticeship Service Account levy funds accounted for 64.9% (209,300) - please see 'About these statistics' for more information about ASA levy funds
• An average of 1.7% of employees started an apprenticeship in public sector organisations between April 2017 and March 2020.

During the period since the start of lockdown (23 March to 31 July 2020), there were 60,860 starts - a 45.5% drop compared to the same period in 2018/19. Of these starts:

• Learners aged 25 and over accounted for 61.6% (54.5% in the previous year).
• Intermediate apprenticeships accounted for 25.6% (36.1% in the previous year).
• Higher apprenticeships accounted for 31.4% (17.7% in the previous year).

In 2019/20:

• The English region with the highest number of starts was the South East with 47,800.
• The English region with the lowest number of starts was the North East with 18,000.

Out of the 322,500 apprenticeship starts reported in 2019/20:

• Women account for 48.8% (157,400 starts).
• Apprentices aged under 19 account for 23.6% (76,300).
• 19 to 24-year-olds account for 29.5% (95,300).
• Apprentices aged 25 and over account for 46.8% (151,000).
• Black, Asian, and other ethnic minorities (BAME) represent 13.3% (42,100).
• Apprentices declaring a learning difficulty or disability (LLDD) account for 12.5% (39,300).
• Private Sector Public Funded providers were responsible for 60.6% (195,600).
• General FE colleges account for 22.8% (73,600) and other public funded (i.e. LAs and HE) providers a further 15.4% (49,800).
• Schools, Sixth Form Colleges, and Special Colleges make up 1.1% of starts.

Because more than one significant thing is happening at once to the labour market, here is the Resolution Foundation of the effects of Brexit on the UK labour market.

• Between 1996 and 2019, migrant workers from the EU and elsewhere have disproportionately filled less-attractive jobs. On average, foreign-born workers in every age group are higher-educated than their British-born counterparts, meaning large numbers are overqualified for the jobs they do.
• Flows of foreign-born workers into the UK have slowed since the referendum in 2016. And, although there are data challenges, there appears to have been a large flow of foreign-born workers leaving the UK in the wake of Covid-19.
• Even with today's slack labour market, there are sectors that look set to experience labour shortages under the post-Brexit immigration regime. Industries such as food manufacturing and social care, which employ a larger-than-average share of EU-born workers in roles that fall outside the Government's list of eligible occupations for a skilled worker visa, and that have a higher-than-average turnover rate, are where pinch-points are most likely to occur.
• So long as the UK is an economically attractive place to work relative to a home country or other potential host states, migrant labour will continue to flow. Under the new immigration regime, more workers may find themselves outside of the rules, increasing their vulnerability to labour market abuse.

Finally, the redoubtable Francis Green of UCL's Institute of Education has published this review of the effects of job insecurity on health.

• Many cross-sectional studies in epidemiology, psychology, and economics show a strong connection between job insecurity and poor physical or mental health.
• Some studies confirm that the effects of job insecurity on health are causal, particularly in relation to mental health, headaches, eyestrains, and skin problems.
• The size of the effect of job insecurity on health can be as large as the effect of unemployment.
• However, many cross-sectional and longitudinal studies do not prove causation, and there are a few countries in which no association is found.
• Longitudinal studies confirm that the harmful effects of job insecurity on health are mitigated when employees are re-employable.
• Social support is associated with higher well-being, and may help in situations of high insecurity; more organizational participation, higher pay, lower work intensity, safer working conditions and greater autonomy can all mitigate the detrimental health effects of job insecurity.
• Little is known about how people may or may not adapt to job insecurity over time or how they may compensate for the associated uncertainty.
• Workers' health is therefore not just a private matter for employees and employers, but also a matter for public policy. Governments should take into consideration the health cost of restrictive policies that generate unemployment and insecurity, while promoting employability through, for example, skills training. Policy should also encourage forms of employee participation and social support in workplaces to mitigate and moderate the negative health effects arising from insecurity.

Written by

Charlie Ball

Head of higher education intelligence

Prospects