UK graduate labour market update: 23 July

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

What we're hearing:

• The graduate labour market has suffered significant damage, particularly in the arts - but things are far worse for non-graduates. Many key graduate employment sectors (in health, social care, IT, business services) have been much less affected than many other areas of the economy.
• 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.
• It does look as if many large graduate employers are not particularly keen at present to engage in the initiatives in the government's Plan for Jobs.
• It is now very clear that there is a significantly greater interest in postgraduate study than usual and students may be willing to accept some virtual delivery if they're assured it is only temporary.
• The outlook for international student recruitment is very tough but many of our key international competitors have their own issues and many, possibly most, prospective international students still seem to be at least considering study.
• Many employers are yet to make firm decisions about recruitment for the rest of 2020, but the decision point is rapidly approaching. Don't assume that the graduate labour market will remain this subdued all year.
• Salaries are likely to remain stagnant or even fall.
• Decisions made about recruitment and business strength this year will also affect next year's recruitment round (at least).
• 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.
• UCAS figures suggest widespread home student deferral may not be as serious a danger as was feared earlier in the year but applications and actual student registrations are two different things.
• A 'V' shaped economic recovery now looks rather less likely than something showing an early initial surge to a lower level than before followed by a much slower, shallower recovery.

People Management have a liveblog on employer actions in the pandemic. 

The government issued its Plan For Jobs on 8 July. A great deal has been written about it elsewhere, but the key points for the graduate labour market include:

• A one-off payment of £1,000 to UK employers for every furloughed employee who remains continuously employed through to the end of January 2021. Employees must earn above £520 per month on average.
• A new Kickstart Scheme, to create six-month work placements aimed at those aged 16 to 24 who are on Universal Credit and are deemed to be at risk of long-term unemployment.
• An additional £32million funding over the next two years for the National Careers Service.
• £2,000 to employers in England for each new apprentice they hire aged under 25, and a £1,500 payment for each new apprentice they hire aged 25 and over.
• Support for 18 to 19-year-olds to take college courses if job opportunities are not available.
• £40million to fund private sector capacity to introduce a job finding support service.
• Tripling the number of sector-based work academy placements in England.
• The government is funding a scheme to support the redeployment of construction workers with in-demand skills who are at risk of redundancy.
• Office for Talent, to focus on attracting, retaining and developing top research and science talent across the UK and internationally.
• £40million in a Green Jobs Challenge Fund for environmental charities and public authorities to create and protect 5,000 jobs in England.

The Institute for Fiscal Studies does note, however, that a lot of this funding had already been allocated.

The Resolution Foundation have produced The Truth Will Out, a guide to understanding labour market statistics in this challenging time, and why different elements of Office for National Statistics (ONS) data seem to be telling different stories. In particular, the Foundation examine why claimant counts rose sharply in April but official unemployment estimates did not. They identify a number of  points to consider:

• The crisis occurred in the middle of the roll-out of Universal Credit. The replacement of legacy benefits by UC leads to more people being captured in the claimant count, including those who would have previously only claimed Child Tax Credits and Housing Benefit.
• The easing of the usual work-search conditions and contact between claimants and work coaches between March and June means that many new UC recipients have not had their work status accurately updated as quickly as usual.
• Longitudinal survey data suggests that at least 27% (400,000), and likely many more, of the 1.6 million claimant count rise between March and May is accounted for by those still working, furloughed workers, or Self-Employment Income Support Scheme recipients. While some of these people will ultimately be thought of as unemployed, it is far from clear that all should be right now.
• The collapse in vacancies caused by lockdown, meant that many people who did not have a job during April, or who lost self-employed work, did not make an effort to look for new work.
• Key employment measures do not give a complete picture of the state of the labour market. The headline employment measure includes people who are temporarily not working (the proportion of employees in this group has risen from around 7% before lockdown to just under 30% in the five weeks after lockdown began), while PAYE data misses out the self-employed, and includes employees who are not working but are being paid (including furloughed workers).

The Office for Budgetary Responsibility (OBR) have produced a report outlining scenarios for the impact of COVID-19 on the economy.

The central scenario - which is now less positive than the central scenario issued in April - assumes activity recovers, albeit slowly and incorporates some scarring to potential GDP. In this reading GDP falls by 12.4% in 2020 and unemployment peaks at 11.9% in Q4 of this year, possibly seeing more than four million out of work. It goes without saying that these are extremely serious economic effects.

Applications to university through UCAS have held up. 40.5% of all UK 18-year-olds have applied - the first time more than four out of ten have applied by this point in the cycle. Last year's equivalent figure was 38.9%. Overall 281,980 young people have applied, increasing from 275,520 a year ago, despite there being 1.5% fewer 18-year-olds in the population than last year.

This week's updates from the ONS are here - reporting to the 16 July.

• Between 3 and 10 July the volume of total online job adverts using Adzuna stood at 48% of its 2019 average. Almost all categories saw minimal changes from the previous week, although for the first time since early April, the volume of job adverts in catering and hospitality was above 30% of its 2019 average.
• 9.4 million employees had been placed on furlough.
• 1.14 million employers had made at least one CJRS claim.
• 57% of employees at employers with five to nine employees had been furloughed against just 19% at employers with 250 or more employees.
• Employees aged 17 were most likely to be furloughed. 61% of female employees aged 17 were furloughed, while the equivalent figure for males was 58%.
• Across the age bands and by gender, male employees aged 41 to 49 were least likely to be furloughed (28%), while for females, employees aged 41 to 57 were the least likely to be furloughed (23%).

The ONS have also published an analysis of which jobs are most able to be done from home. They use data from the (excellent) US resource O*Net, which looks at the characteristics of specific jobs to identify five factors that are associated with being less able to work from home. These are:

• whether the job has to be carried out in a specific location
• amount of face-to-face interaction with others
• exposure to burns, infections and other hazards
• whether the job requires physical activity
• use of tools or protective equipment.

The ONS then included data on the  extent to which digital communication is integrated into the workplace, and whether employees have the technology they need to work from home.

Employees who earn higher hourly wages are more likely to be able to work from home. Chief executives and senior officials, whose median earnings are £44.08 an hour, are among those most able to work remotely, as are financial managers and directors (£31.38) and programmers and software development professionals (£21.97). Gardeners, whose median hourly earnings are £10.27, are very unlikely to be able to work from home, as are carpenters and joiners (£13.18) and elementary construction occupations such as labourers (£10.25).

The median earnings of employees in the 20% of the workforce most likely to be able to work from home is £19.01, compared with £11.28 for workers in the 20% of workers in jobs least likely to be adaptable to home working.

The House of Commons Library have again updated their briefing on the effects of pandemic on the labour market, this time to 17 July and mainly covering the Plan for Jobs and OBR publications. Although it doesn't contain anything that has not been covered in these summaries, this remains probably the single best overview of the current state of play (outside of Luminate!) and is highly recommended.

British Chambers of Commerce have updated their Business Impact Tracker, to 22 July. Businesses are, on average, operating at 53% capacity. 54% said that customer demand was a barrier to restart and 52% said that the prospect of future lockdowns was a major obstacle to resuming operations. 13% had laid staff off and 33% expected to do so in the next three months. 62% of respondents expect some or all of their staff to be working remotely in the next 12 months - note that 97% of respondents to this survey were SMEs.

The Institute of Employment Studies have released analysis on the impact of COVID-19 on the low-paid.Those in low paid jobs are more likely to be women, to be young, to be black or from a minority ethnic group, to be under-employed and/or to have lower qualifications.So those in low paid work are already disadvantaged in the labour market compared to higher paid workers.

Employment has fallen significantly already for those in low paid jobs - down by four percentage points between February and April, from 82% to 78%, equivalent to a fall of 140,000. Meanwhile employment is unchanged for those in higher paying jobs. Those in lower paying jobs are twice as likely to report that they are 'away' from work (but still employed) and report a greater reduction in usual hours of work than those in higher paying jobs.

The CIPD have conducted research finding that  the number of people working from home post-pandemic may double, and that homeworking has not negatively affected productivity.

Employers expect that the proportion of people working from home on a regular basis once the crisis is over will increase to 37% compared to 18% before the pandemic.

Employers also expect the proportion of staff who work from home all the time to rise to 22% post pandemic compared to 9% before lockdown measures started to be imposed. Employers believe people working from home are as productive as other workers. 28% of employers believe the increase in homeworking has increased productivity or efficiency, compared to 28% of organisations that report the opposite effect and 37% that don't believe there has been any effect on productivity or efficiency.

The Centre for Cities have updated their High Street Recovery Tracker to 15 June. It looks at the average city centre footfall for the last week in June compared to pre-pandemic levels and while not easy to summarise for labour market updates is nevertheless worth a look. Basildon, Birkenhead, Chatham, Burnley and Doncaster are seeing town centre footfalls at the higher proportion of their pre-lockdown levels, Manchester, Cardiff, Edinburgh, Oxford and London are seeing the lowest percentages of levels pre-lockdown.

The Centre have also analysed Indeed data to establish where the hardest places in the UK to find a job might be. Their method uses the number of job searches against the number of updated CVs for a given area, and finds that Middlesbrough, Sunderland, Dundee, Luton, Burnley, Birkenhead and Barnsley have the highest ratio of CVs to vacancies, and Cambridge, Oxford, Reading, Exeter, Bristol and London have the lowest.

The Recruitment and Employment Confederation (REC) and EMSI have updated the Jobs Recovery Tracker. This one goes to 12 July. The total number of active job adverts was 1.05 million in the week of 6-12 July, up from 990,000 in the final week of June. There were also 106,000 new job adverts posted in the week of 6-12 July, 14,000 more than the week of 22-28 June. IT roles saw a particularly strong increase, as did graphic designers and sales administrators.

Indeed have also analysed their own jobs postings, to 10 July. Overall postings were down -59% on last year's trend, a level that has changed little since May. Weakening most in the past fortnight have been social science (mostly psychologists), physicians & surgeons, pharmacy, insurance and medical information (including clinical managers and healthcare advisers), as some of the healthcare categories that had held up relatively well earlier start to tail off. Sports and hairdressing saw a modest recovery.

The majority of tour operators and destination management companies (DMCs), are set to make large scale redundancies as a result of the Covid-19 crisis, unless the government provides more financial support to the sector:

• 60% will be forced to make further redundancies in August when the Coronavirus Job Retention Scheme tapers off
• 88% expect to make between 25% and 100% of their staff redundant
• 53% expect their business to last no more than six months.

PWC have issued another update to their ongoing analysis of the impact of pandemic on the economy, this time to 22 July. This one features the prospects for labour market recovery. PWC expect demand for labour to fall about 5% over the course of 2020, with accommodation and food services seeing a 22% reduction in labour demand and the arts seeing a fall of 18%. Admin and support and energy and utilities are expected to see no change in demand and financial services only a modest 1% fall.

This will lead to about 17% of furloughed workers losing their jobs - about 1.6 million workers. Again, accommodation and food will be hit hardest, losing about a third of furloughed workers, although PWC anticipation over a fifth of furloughed workers in the arts and in education losing their jobs. As well as making the unsurprising prediction that jobs in health and social care will thrive, PWC also observe that the Local Government Association estimates that the 'low carbon workforce' will treble by 2030 and that demand for digital skills and transferrable skills such as creativity, critical thinking, interpersonal communication skills and leadership skills will also become more important as technology advances.

Written by

Charlie Ball

Head of higher education intelligence

Prospects