UK graduate labour market update: 3 December

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

• Projections of economic recovery are now assuming 'normal' in 2022 or 2023. We can therefore expect at least one more cycle of reduced graduate recruitment.
• 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.
• The creative sector has had a very hard time and will need some time and help to recover.
• 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.

This week's news and reports

The government issued its Spending Review on 25 November. There isn't a great deal directly related to graduate employment or skills in the review but some measures of significance include:

• The government expects unemployment to rise during 2021.
• There will be a £3billion 'Restart' programme to provide those who have been out of work for more than 12 months with tailored job-seeking support.
• The OBR forecasts that GDP will fall by 11.3% in 2020, before returning to growth in 2021. However, the economy is not expected to reach pre-crisis level until the end of 2022.
• There will be £100billion of capital expenditure next year, for projects (some already ongoing) such as school and hospital rebuilding, and flagship transport schemes.
• There's a focus on investment in Green industries.

The House of Commons Library have duly updated their summary of the effects of COVID on the UK labour market.

The OECD has issued its Economic Outlook for December and looking ahead to 2021:

• Vaccination campaigns, concerted health policies and government financial support are expected to lift global GDP by 4.2% in 2021 after a fall of 4.2% this year. The recovery would be stronger if vaccines are rolled out fast, boosting confidence and lowering uncertainty.
• Delays to vaccination deployment, difficulties controlling new virus outbreaks and failure to learn lessons from the first wave would weaken the outlook.
• The bounce-back will be strongest in the Asian countries that have brought the virus under control but even by the end of 2021, many economies will have shrunk from 2019 levels before the pandemic.

For the UK specifically:

• UK GDP is set to contract again in the fourth quarter of 2020 as virus containment measures are implemented, and to fall by 11.2% in 2020 as a whole.
• Growth of 4.2% in 2021 and 4.1% in 2022 is projected to be driven by a rebound of consumption, while business investment will remain weak due to spare capacity and continued uncertainty. Until an effective vaccine is broadly deployed, risks of further outbreaks will dent confidence.
• Increased border costs will weigh on imports and exports from 2021 as the UK leaves the EU Single Market and is assumed to enter a new, less comprehensive free trade agreement with the European Union.
• Labour market withdrawals and unemployment will increase even though the Coronavirus Job Retention Scheme continues to support employment.
• Bankruptcies are set to rise, although extensions to crisis loan schemes are set to soften the increase.

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

The latest round of rapid indicators for the UK economy were released on 26 November:

• The proportion of the workforce on partial or full furlough went up sharply to 15%.
• The proportion of the workforce at their normal workplace fell to 51%.
• 30% of the workforce was working remotely.
• Job ads stood at 71% of the 2019 average.
• Manufacturing, construction, accountancy/finance, IT, engineering, law, marketing/PR, healthcare, education and management all saw increases.
• Manufacturing, construction, engineering, healthcare and IT, all areas with recruitment difficulties pre-pandemic, were all running at over 80% of their 2019 average.

NESTA have released a report from their Careers Causeways project, examining job transitions and careers at risk from automation in the UK, France and Italy, as well as ways in which workers can acquire new skills.

• The research finds that automation risk can be hard to escape.
• Occupations that are at high risk of automation tend to require similar skills (these occupations sit close to each other on the map).
• At-risk workers, who predominantly reside in sales, customer service and clerical roles, will require more retraining to find an occupation that is at a lower risk.

NESTA use a method that is interesting to labour market nerds, involving linking O*NET (from the US) and ESCO (from Europe) and using that data alongside crowdsourced data on roles suitable for machine learning. There are more details here along with an experimental tool showing how the data could be used in guidance. This is an ongoing piece of work and worth following.

REC's Jobs Outlook for November is out:

• Employers' confidence in their ability to make hiring and investment decisions fell to net: -5 for the three months to October 2020.
• Business confidence in the wider UK economy also fell by five points to net: -49 over the same period.
• However, confidence levels remain far higher than reported in the spring.
• Demand for permanent workers remained stable in both the short term and medium term, at net: +14 and net: +17 respectively. This suggests the possibility of a recovery as we leave the lockdown and vaccines are rolled out.
• Short-term demand for agency workers rose by three percentage points from the previous rolling quarter to net zero, while medium-term demand rose by seven points to net: +4

Deloitte have examined the effects of automation on diversity in the public sector:

• Automation may affect groups most disadvantaged by structural inequality.
• There is evidence that workforce diversity is a key driver of innovation and so a reduction in diversity due to automation may stifle innovation.
• The public sector seems less prepared for automation than private and seems to be opting to develop technical skills (either through recruitment or internal upskilling) rather than the soft skills such as problem-solving, creativity and communication that are more likely to be required for the jobs into which disadvantaged groups will be displaced.

The Institute of Employment Research at the University of Warwick have worked with the Co-Op to examine how best apprenticeships can be developed to meet workforce and skills needs post-pandemic. This is a long and rich report with many findings and recommendations. It finds general agreement that apprenticeships can be updated, including:

• clearer definition of what constitutes an 'apprenticeship'
• more action on diversity
• standards to be more agile to changes in work and to be more responsive to the needs of smaller employers
• apprenticeships to be more available to flexible workers
• the need to enhance progression into, within and beyond apprenticeships.

London's labour has been hit more seriously by pandemic than the rest of the country - and Indeed’s Jack Kennedy has done some very interesting analysis showing that this is not unusual.

• Job postings on Indeed are down eight percentage points more in Berlin, nine points more in London, seven points more in Madrid, 16 points more in Paris and 11 points more in Rome than in the rest of their respective countries.
• The lag reflects the fact that customer-facing service sectors like food, hospitality, and beauty & wellness are harder hit in the capitals than elsewhere.
• These trends may stem from the greater prevalence of work-from-home jobs and reduced travel outside the home in these cities, evidence that the pandemic is having a disproportionate impact on the labour markets in them.

PWC have issued a new Economic Update on 24 November 24:

• In September, 181,000 people were made redundant, bringing the unemployment rate for the three months to September up to 4.8%.
• However, there was also a record flow of 215,000 people from economic inactivity to unemployment, which suggests that the gradual relaxation of social distancing measures and the opening of schools has encouraged workers to seek employment.
• PWC project that month-on-month growth in GDP in October will be 0.4%, in November a fall of 5.7% as the second lockdown took effect and then marginal growth of 0.3% in December.
• Under PWC's 'quick rebound' and 'slow rebound' scenarios, the expected contraction in GDP ranges from around -11.2% to -11.4% in 2020, before returning to growth of around 6.0% - 3.4% in 2021. But PWC warn that this is already a downward revision from the summer and that risks are on the downside.
• Most sectors will return to growth in 2021, with hotels, food service, transport and healthcare expected to grow by between 21% and 48% on average under the 'quick rebound' scenario, and between 4% and 13% under the 'slow rebound' scenario.

Written by

Charlie Ball

Head of higher education intelligence

Prospects