UK graduate labour market update: 16 November

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

What we're hearing

• The new lockdown is a very serious blow to many businesses, but especially to SMEs and to retail, hospitality and the arts.
• Most projections of economic recovery did not assume a second lockdown of this nature. Those that did suggest that the UK will not get back to where it was in February until 2022 at the earliest. This means that the 2021 recruitment round is now likely to be down.
• The level of vacancies is running at somewhere around two thirds of normal rates and seemed to be climbing - slowly.
• Graduate training schemes are down but probably not as much as most of the rest of the market.
• It looks like there'll be a two-track recovery (US economists are calling it 'K-shaped', with some sectors, particularly those where remote working is effective, recovering rapidly and others slowly. As most of the rapidly-recovering sectors are highly graduate this may exacerbate the already serious social and economic divides in the country.
• Things are also looking difficult for the self-employed, partly because a lot work in sectors, such as the arts, that have been badly affected and partly due to sheer lack of cash reserves - although the sector has been more resilient than originally feared
• Formal and conventional internships as we knew them pre-pandemic are down but employers are trying to find alternatives and there is likely to be quite a diverse and innovative set of work experience offers.
• Apprenticeships have been hit hard in SMEs but seem to be recovering in larger businesses
• A lot of employers are adopting virtual recruitment strategies which are likely to stick post-pandemic.
• The collapse in employment in retail and services is likely to affect term-time jobs for students in the future and thus the ability for students from less advantaged backgrounds to support themselves at university.
• The pandemic is going to profoundly change the nature of work for many employees and professional services and IT workers in particular have proved as productive at home as in the office, so a widespread move to homeworking is likely for many graduates. The large majority of workers in tech and professional services are currently working from home, and if this pattern persists it will significantly change many aspects of society, particularly in our cities.
• London seems to be taking a particular hit, with footfall and vacancies well below normal levels. It remains a very strong graduate economy though.
• Many of the big graduate training schemes are in the process of enacting plans for their 2021 recruitment round. At present we are hearing of some pauses, but they seem to be the minority at the moment - that said, this was before a second lockdown was announced. A reasonable view of the 2021 round right now is that it may be down on a normal year but better than the 2020 round.

This week's news and reports

People Management continue their liveblog on employer actions in the pandemic.

UK GDP is estimated to have grown by 15.5% in the third quarter. GDP in the UK is still 9.7% below where it was at the end of 2019.

• Services industries remained 8.8% below the level of February 2020, growing by 1.0% in the latest month.
• Manufacturing has declined by 8.1% since February 2020, growing by 0.2% during September.
• The construction industry remained 7.3% below the February 2020 level, growing by 2.9% in the latest month.
• Professional, scientific and technical activities grew by 3.9% during September but remained 9.0% below their February 2020 level.
• Advertising saw the largest rise at 8.7%, which was widespread after a flat August. But the industry remained 18.6% below its February 2020 level of output.
• There were increases of 5.4% in accountancy services and 5.1% in legal activities following small falls in both during August. Large businesses in both industries have returned to the level of output they experienced in February, but SMEs in these sectors have suffered particularly and are yet to recover.
• There were also rises of 3.9% in research and development and 2.7% in architects and engineers, driven mostly by large engineering businesses.
• The small decline for the information and communications industry in September 2020 was largely because of a 4.3% fall in publishing. Small decreases in film and television production and telecommunications also contributed. In addition, information services contracted by 3.1% as large businesses fell back from a strong August. Finally, programming and broadcasting returned to more normal levels, picking up by 4.5% from a weak August.
• The food products industries were 3.0% weaker in September than in February 2020, with the other food products category (this includes sugar, tea and coffee processing, manufacture of prepared meals, condiments, and seasonings) the hardest hit.
• Despite a monthly decline of 9.8%, which offsets much of the overall strength in manufacturing during September, output in the pharma industry remained 1.2% above its February 2020 level. The monthly fall was mainly because of the cumulative impact of weakness from large businesses and highlights the volatile nature of growth in this industry.
• Because of ongoing weak global demand, car production remained significantly below normal levels. The Society of Motor Manufacturers and Traders (SMMT) reported that during September 2020, the total number of cars manufactured and the total number of cars exported had declined by 5.0% and 9.7% respectively on September 2019 levels.
• The air, spacecraft and related machinery industry rose by a negligible 0.9% during September 2020, but output was 26.2% weaker than in February 2020. As a result of the widely reported negative impact on global civil aviation, manufacturers facing this sector have been severely impacted.
• Additionally, supply chains for both industries have been negatively impacted, which in turn had a negative effect on associated industries in other subsectors across manufacturing.
• Construction output grew by 2.9% in September 2020 compared with August 2020. Public other new work, infrastructure and public new housing were the only sectors not to see monthly growth in September 2020.

The latest round of rapid indicators for the UK economy were released on 12 November.

• 49% of currently trading UK businesses reported a decrease in their turnover below what is normally expected for this time of year.
• Between 30 October and 6 November, total online job adverts saw a slight fall to 67% of their 2019 average - this covers the period immediately after the announcement of a new lockdown in England.
• Graduate-level vacancies did see a rise though and were running at 77% of the 2019 average. Industries seeing an increase included oil and gas, IT and law.
• 27% of the workforce were working from home exclusively, 58% were travelling to work.

More details on employment from the ONS are here:

• Since March, the number of payroll employees has fallen by 782,000 - in October 33,000 fewer people were in payrolled employment when compared with September.
• The UK employment rate in the three months to September 2020 was estimated at 75.3%.
• The UK unemployment rate in the three months to September 2020 was estimated at 4.8%.
• In the three months to September 2020, there were 314,000 redundancies, up 181,000 on the previous quarter.
• For August to October 2020, there were an estimated 525,000 vacancies, a quarterly increase of 146,000 vacancies and an increase of 182,000 vacancies from the record low in April to June 2020.
• The smallest businesses, with one to nine employees, saw the largest quarterly growth in vacancies, with an estimated increase of 36,000 vacancies, compared with an estimated increase of 18,000 for larger businesses with more than 2,500 employees.
• Despite the increase, vacancies remain below the pre- pandemic levels and are 278,000 (34.6%) less than a year ago.

Scottish data is here:

• Early estimates for October 2020 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 employment rate in Scotland was 74.0%. This is 0.4 percentage points up on the quarter.

Northern Irish data is here:

• 9,600 collective redundancies were proposed in the 12 months to the end of October, over double the number recorded in the previous 12 months.
• During October, 820 redundancies were proposed, a decrease on the previous month's total of 1,150, and 1,240 redundancies were confirmed, an increase from the total of 460 confirmed in September.
• The total number of hours worked across the economy increased by 11% over the most recent quarter after falling by 19% between January-March and April-June. The total number of hours worked per week during July-September remains 11% below the total at the beginning of 2020.

And the Senedd has data for Wales:

• For July 2020 to September 2020 the unemployment rate for people aged 16+ in Wales was 4.6%, compared to 2.7% in the previous quarter (April 2020 to June 2020). This is an increase of 28,000 people from the previous quarter, up to 70,000.
• The unemployment rate in Wales (4.6%) is lower than England (4.8%) but higher than Scotland (4.5%) and Northern Ireland (3.6%).
• 10% of the Welsh workforce were under furlough at the start of September.

New monthly stats mean an update to the House of Commons research briefing on the impact of COVID-19 on the labour market. This remains a first rate resource to use as a summary of the current situation.

The Institute of Student Employers have released their annual student recruitment survey. This is an important report for the graduate labour market and is full of useful data. The survey presents data collected from 179 ISE members. The respondents reported recruiting a total of 46,068 student hires during 2019/2020. Some highlights include:

• Employers reported recruiting 12% fewer graduates, 29% fewer interns and 25% fewer placement students and only 6% more school and college leavers than they did in 2019. Retail and FMCG hires were down 45%.
• Employers are able to fill 97% of their graduate and school and college leaver positions.
• 86% of graduates and 92% of school and college leavers accepted jobs offered.
• 11% of respondents are planning to engage with the government's Kickstart scheme for unemployed young people.
• 75% of respondents believe that resilience will become more important for applicants over the next five years.
• 17% of respondents believe that IT programmers will become more difficult to hire in the future. 10% believe general IT staff and engineers will become harder to find.

Results from the British Chambers of Commerce Quarterly Recruitment Outlook (QRO), in partnership with Totaljobs, are in:

• 37% of firms attempted to recruit in Q3.
• Businesses within the construction (48%) and transport/distribution (44%) sectors were among the most likely to recruit. Hotels and catering firms (30%) were the least likely to recruit.
• 62% of firms expect no change to the size of their workforce in the coming three months, while 19% said they anticipate decreasing the size of their workforce, down from 29% in Q2.

Stephen Machin , Jack Blundell, and Maria Ventura have written a paper for the LSE's Centre for Economic Performance on self-employment in the pandemic:

• Between April and August, the self-employed experienced little economic recovery, with hours and incomes being significantly lower than the same time last year, and 58% reporting having less work than usual in August. Solo self-employed and older workers continue to be the most negatively affected.
• Self-employed individuals who find work through apps - such as private hire drivers - are among the least negatively affected, with a third reporting having more work than usual.
• At the same time, many consider their health to be at risk but continue to work due to concerns about losing their job, strongly suggesting a one-sided flexibility in these 'gig economy' jobs.
• One fifth of workers consider it likely that they will leave self-employment. This is higher among less risk-averse workers, younger workers, and those excluded from government support.
• Self-employed workers are now pushing back their expectations on when their business will be back to normal. 21% of respondents say they have returned to normal business levels, and only about 20% expect to resume their regular activity by December.
• Schools reopening has lifted some of the pressure off self-employed parents, whose work was adversely affected by the intensified caregiving responsibilities during the lockdown.

The CIPD and Adecco have released their Autumn labour market outlook:

• 30% of employers plan to make redundancies in the three months to December 2020.
• Employers are using a wide range of tactics to stave off redundancies where possible. These include temporary lay-offs or furloughing staff (41%), redeployment (37%), recruitment freezes (32%), freezing or delaying wage increases (29%) and cutting bonuses (29%).
• Employers anticipating making redundancies in the next three months are expecting to cut a lower proportion of their workforce compared with the summer.
• The healthcare and education sectors expect to see increased staffing levels during autumn.
• Manufacturing, finance and insurance, hospitality and construction expect to see their workforces shrink.
• Employers received a median of ten applications for the most recent professional-level role they advertised for, higher than the seven applications they reported receiving in the summer. By comparison, the mean number of applicants employers received for professional-level roles was 56.

Indeed's Hiring Lab continues to report, this time to 6th November:

• Job postings on Indeed UK stood 44% below last year's trend as of November 6, unchanged from the previous week.
• Lower wage jobs are bearing the brunt as tighter restrictions hit in-person services.
• But high-paid jobs and sectors supporting the stay-at-home economy are faring better.
• Improvements in job posting trends over the latest month were led by chemical engineering (mainly gas engineers). Certain healthcare occupations like medical technicians and physicians & surgeons saw improvements.
• London remains below half of 2019 job posting levels.

The Learning and Work Institute have issued a report, Learning Ladders, on the role of adult training in progressing from low pay:

• Workers are more likely to escape low pay if they are younger, live in London, have a more privileged background, work in a professional occupation and are a white international migrant.
• Participating in a higher number of training days significantly increased the likelihood of escaping from low pay. Low paid workers with higher prior qualification levels are also more likely to progress.
• The three significant predictors of participation in training (after accounting for interactions between different characteristics) were: higher prior qualification levels, being female and living outside of London.
• Individuals undertaking higher levels of learning are more likely to escape low pay. Level 3 courses (A-level or equivalent) were found to significantly increase the earnings of low paid workers by an average of 5%.

And finally, two handy links for stats on the pandemic:

• The Centre for Cities Unemployment Tracker for UK cities
• Eurostat's compendium of European labour market data

Written by

Charlie Ball

Head of higher education intelligence

Prospects