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Job Retention Scheme masks true scale of unemployment

Joanne Frew, National Head of Employment at global legal business, DWF, comments on the latest ONS Labour market overview and employment figures for July 2020. She said:

"The latest ONS employment statistics show the largest quarterly decrease in employment from May to July 2009. The number of employees in the UK on payrolls is down by around 730,000 compared with March 2020. The figures show that employment is weakening; however, unemployment, i.e. the number of people looking for work, is largely unchanged due to economic inactivity. Reports indicate that many people are out of work but not currently looking for work. One explanation for this could be the number of people who have struggled with childcare issues during the pandemic. With schools opening in Scotland this week and expected to open elsewhere in September, it is likely there will be a sharp increase in people looking to return to the job market.

"The Coronavirus Job Retention Scheme (CJRS) will also inevitably be masking the true scale of unemployment. Figures are expected to surge in October when the Scheme closes. Although the Government has launched the Job Retention Bonus to help incentivise employers to bring employees back from furlough, longer-term strategies will need to be implemented to help tackle unemployment. 

"The latest figures show that the three months to June 2020 saw notable falls in pay; total nominal pay fell by 1.2% on the year, and regular nominal pay fell by 0.2%. However, sectors where the highest percentage of employees have returned to work from furlough, including wholesaling, retailing, hotels, restaurants and construction saw a slight improvement in pay growth for June 2020. With the Government's scheme "Eat Out to Help Out", these figures can be expected to continue to improve in the hospitality sector throughout August."

"The ONS figures show that the youngest workers, oldest workers and those in manual or elementary occupations are most likely to be temporarily away from paid work. These statistics are a cause for concern as reintegrating these groups into the labour market may be challenging.

"With several local lockdowns and predictions of a possible second wave of COVID-19, it is unlikely that we will see any immediate improvement in the employment figures. However, as employers diversify and adapt to the new normal, we may see the statistics level out once the impact of the closure of the CJRS has taken effect."

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