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 economy is improving, but we're a long way from where we were at the start of the year and a prolonged return to lockdown will be a blow to small businesses and sectors like culture, retail and hospitality that have already had a hard time.
- The level of vacancies is running at just over 50% of normal rates and seems to be climbing - slowly.
- The graduate labour market has suffered significant damage, particularly in the arts - which may be the worst-affected sector in the UK. Many key graduate employment sectors - in health, social care, IT, finance - have been much less affected than many other areas of the economy. Retail, hospitality, travel and accommodation employers have all taken long-term hits.
- 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.
- Undergraduate students have shown up for the start of term in large numbers but COVID outbreaks and lockdown restrictions are affecting morale and mental health, and dropouts are a concern. But we must also be mindful that young people not in employment have very few alternative options at the moment.
- Postgraduate interest is strongly up.
- 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.
- 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 employers are at least discussing recruiting in Q3 and Q4 if conditions permit after missing the normal recruitment round earlier in the year. Others have decided to wait until 2021 though.
Between 18 and 25 September, total online job adverts increased from 55% to 59% of their 2019 average, with all categories seeing climbs.
People Management continue their liveblog on employer actions in the pandemic.
The ONS have reporting on the social impacts of COVID-19 to 2 October:
- The proportion of working adults who travelled to work at some point during the week fell to 59%, from 64% the previous week.
- The proportion exclusively working from home increased to 24%.
- Between 18 and 25 September, total online job adverts increased from 55% to 59% of their 2019 average, with all categories seeing climbs. Health vacancies stood at 96% of the 2019 average, and education at 70%.
- The East Midlands continued to see the strongest recovery in the volume of job adverts, standing at 76% of their annual average. Wales stood at 73%. London continues to see the weakest recovery, with job adverts at 48% of their 2019 average.
REC published their JobsOutlook to the end of August in conjunction with ComRes. This is based on interviews with 500 employers and found that:
- Employers' intentions to hire permanent staff in the next three months rose to a net level of +11 in June-August. This is very good news in the current market.
- The survey's measures of business confidence - while still in negative territory - have also improved. Confidence in making hiring and investment decisions was at net: -3 in June to August.
- However, confidence in the UK economy was at net: -44, showing the majority of employers still believe the economy's prospects as a whole are worsening (although this is nevertheless improving from the previous quarter).
- 34% of employers reported having no surplus capacity in their workforce in June-August, up from 29% in the previous rolling quarter. In August alone, this rose to 39%.
British Chambers of Commerce have published findings from their Quarterly Economic Survey for the third quarter of 2020. The QES is an important piece of work - this survey canvassed 6,410 firms, employing over 580,000 people across the UK. It found that:
- In general conditions have improved over Q2, but remain extremely weak.
- 46% of firms reported a decrease in domestic sales. 27% reported an increase on the previous quarter.
- 66% of respondents in hospitality and catering saw decreases in sales and bookings.
- Indicators, including cash flow, remain at levels comparable to the 2008-09 recession for firms in the services sector.
- 41% of firms said they expected their turnover to increase over the next 12 months, 35% still expected it to decrease. 24% expected that it would stay the same.
Most firms consider that their adoption of new technologies, capabilities or practices will increase employee productivity rather than reduce the need for employees over time.
The CBI and LSE have published a report on the way firms have innovated as a response to COVID. The Business Response to Covid-19: the CEP-CBI Survey on Technology Adoption surveyed 375 UK businesses to understand the way in which firms have innovated in response to the crisis:
- 75% of respondents had moved to remote working and, on average, they experienced a 25% loss of revenue compared to 'business as usual'.
- In the period from late March to late July 2020, over 60% of firms adopted new digital technologies and management practices, and around a third invested in new digital capabilities.
- Nearly half of respondents have introduced new products or services.
- The vast majority of respondents stated that Covid-19 prompted or accelerated the adoption of new practices and products.
- These process and product innovations are generally considered to have had a positive impact on performance, and businesses expect to maintain them post-crisis.
- When asked about the impacts of these changes on their workforce, most firms consider that their adoption of new technologies, capabilities or practices will increase employee productivity, or allow employees to be reallocated to different tasks, rather than reduce the need for employees over time. Only 10-15% anticipate that these changes will reduce headcount.
- Firms that had previously adopted digital technologies were significantly more likely to adopt new technologies, capabilities and practices, and introduce new products, even after controlling for other key business characteristics.
- London-based businesses were more likely to have adopted digital technologies, but there is no clear regional pattern to innovation in other measures.
Indeed have updated one of their previous reports by looking at where it was hardest to find work in August.
- Competition for jobs is higher in places with weaker economies, with eight times more local candidates per job posting in Middlesbrough than in Cambridge.
- Jobseekers tend to be less specific in their job searches in cities where jobs are scarcer, suggesting they cast a wider net in weaker labour markets.
- Competition for jobs has risen most in cities where jobs were already in short supply.
- The cities Indeed report as having the most competition for jobs are Middlesbrough, Sunderland, Luton, Birkenhead and Dundee. Meanwhile Cambridge, Oxford, Exeter, Reading and Bristol had the least competition.
The Institute of Fiscal Studies have a 'real time jobs vacancies tracker', which isn't really real time (it currently goes up to mid-August) but which does examine DWP vacancies in a variety of interesting ways and is worth a look as it provides some useful data that isn't available elsewhere.
The IFS have also been releasing chapters from their Green Budget, their annual discussion paper around the decisions and choices facing the Chancellor about taxes, spending and public policy. The chapter about the 'levelling-up' agenda and regional inequality has just been published. There is a lot of interesting data in here but the labour market angle is that 'left-behind' areas tend to have a low proportion of the population with HE qualifications, and this is put into stark contrast when Wandsworth, where 71.6% of the population have an HE or equivalent qualification, is compared with Great Yarmouth, where 15% of the population are similarly qualified.
There is also some very interesting discussion of the impact of COVID, with the IFS pointing out that some of the centres of our largest cities, such as Glasgow, Liverpool, Manchester and Newcastle have been badly affected.
Tristram Hooley of the ISE examines the Winter Economy Plan.
And PWC have produced their September UK Economic Update. The report examines potential scenarios for the next few months in the UK. The two main scenarios are 'contained spread', where R stays slightly above one in the autumn, resulting in a gradual but marked rise in the number of new reported cases as winter approaches. Local lockdowns largely contain viral spread.
Under the 'further outbreak' scenario PWC expect to see a more significant rise in infections leading to a number of simultaneous outbreaks in various parts of the country, possibly at levels close to the May peak, which precipitates the return of a national-level lockdown.
Under 'contained spread', UK GDP is expected to fall about 11% in 2020 and then rise by 10% in 2021, while 'further outbreak' sees a fall of 12% in 2020 and a rise of 4% in 2021.
The UK economy would recover to around pre-lockdown levels by the end of 2021 under the 'contained spread' scenario, and in the middle of 2023 under the 'further outbreak' scenario.
Most sectors will return to growth in 2021, including hard-hit sectors such as retail and hospitality as they recover from a low base in 2020.
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