Employees on payrolls drop 600,000 in two months

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The UK could be heading into an ‘employment crisis’, commentators have warned, as the number of employees on payrolls dropped by 612,000 in two months.

Early estimates from Pay As You Earn Real Time Information (PAYE RTI) data showed that the number of staff on employer payrolls fell by 2.1% between March and May 2020, according to the Office for National Statistics.

At the same time, the number of vacancies fell to a record low, with early figures indicating that the number of jobs posted between March and May plunged 60%.

There were an estimated 476,000 vacancies in the UK in March to May 2020; this is 342,000 fewer than the previous quarter and 365,000 fewer than a year earlier, the ONS said.

Gerwyn Davies, senior labour market adviser at the CIPD, said the record fall in vacancies was the most worrying feature of this latest statistical release.

“The UK is clearly entering a major employment crisis,” he said. “The private sector is unable to create enough jobs due to a lack of demand for products and services, which bodes ill for the remainder of the year as the Job Retention Scheme unwinds, unless business conditions improve very significantly over the rest of the summer.”

Jack Kennedy, UK economist at job site Indeed, said the number of vacancies posted on its platform plummeted when lockdown restrictions were introduced and questioned how low the jobs market could go.

“With vacancies falling to a record low in May, the claimant count soaring and millions more workers being furloughed, the signs point to a labour market in retreat with swathes of workers’ wages mainly paid for by the government.

“While hiring in other countries like France, Germany and Italy has started to tick back up slightly in the UK job opportunities are at rock bottom compared to last year. Overall, job postings on Indeed are -61% down year on year,” he said.

The employment rate for the three months to April 2020 was estimated at 76.4%; 0.3 percentage points higher than the previous year but 0.1 percentage points lower than the previous quarter.

The unemployment rate was 3.9%, which was 0.1 percentage points higher than a year earlier but unchanged on the previous quarter, the ONS’s Labour Force Survey reveals.

Claims for unemployment benefits and Universal Credit also increased, reaching 2.8 million in May. This figure includes both those employed with low income or hours, and those who are unemployed.

However, Recruitment and Employment Confederation CEO Neil Carberry said there were some indications that the jobs market was recovering, even if ONS statistics did not show it.

The signs point to a labour market in retreat with swathes of workers’ wages mainly paid for by the government,” – Jack Kennedy, Indeed

“A lot has changed since April – with the claimant count rising to 2.8 million, the unemployment rate is likely to be much higher than 3.9% now,” said Carberry.

“But with the lockdown being eased and the economy opening up, hiring should grow. The scale of the growth in unemployment through the rest of the year will depend on consumer confidence and how employers react to the winding down of the furlough scheme. The good news is that the number of job adverts active in the UK has been slowly increasing, with more new job ads being posted every week.”

The REC’s Jobs Recovery Tracker shows there were almost 963,000 job postings between 1-7 June, up from 950,000 in the week starting 11 May.

But some organisations have warned they will require further support from the government to avoid mass redundancies, despite the easing of lockdown restrictions over the coming weeks and months.

In a letter to Boris Johnson organised by Deliveroo and signed by 90 restaurant and fast food chains including Pizza Hut and Pret A Manger, employers argued that further support with rent and tax obligations was needed while they would experience reduced footfall in light of the two-metre social distancing guidance.

The letter says: “Without government support to help restaurants to generate revenue and cover costs, tens of thousands of restaurants may be forced to permanently close their doors in the coming months.

“This crisis is far from over and the potential consequences are deeply concerning. A huge number of restaurants across the country are facing the prospect of bankruptcy.”

A government spokesperson told the BBC: “We are working closely with the hospitality sector to develop safe ways for restaurants, bars and cafes to reopen as soon as we can from July.

“These businesses can continue to access our extensive package of support, including our job retention scheme which has been extended until October – meaning it will have been open for eight months and will continue to support businesses as the economy reopens and people return to work.”

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