What’s Happening to the UK Labour Market under COVID-19? Looking for signs of excess and what it shows (so far). Part 1

Six months into the worst pandemic of the modern era, the worst recession of the modern era and yet and yet ....
the labour market is proving to be remarkably resilient (so far) – at least along the dimensions normally used to measure labour market performance. Recessions are usually accompanied by some combination of job loss, hiring freezes, wage cuts or hours reductions. But this of course is a recession with few precedents (the 1918-1920 flu pandemic and aftermath of world war 1 perhaps comes closest). As we shall see the furlough policies put in place have almost certainly helped prevent major job shedding seen elsewhere. In a rapidly evolving crisis, there is a need for regular and timely information to assess the course of labour market performance throughout the crisis and develop strategies to address the problems that emerge. Administrative data, like the claimant count measure of unemployment, are timely but not generally rich enough to provide the comprehensive view of labour market performance needed to inform and develop policy. Household surveys, like the Labour Force Survey (LFS) are much richer but hitherto have been used/made available at more discrete intervals, making assessments of labour market performance better, but less contemporary.

A couple of recent aricles (see Paper 1  or Paper 2 ) have shown how the weekly information in the LFS can be used to estimate a broad range of labour market indicators at much higher frequencies than usual. We can compare the current weekly performance of, say, the unemployment rate with the equivalent weekly norm observed over the previous five years. Any sustained departures from the norm is something to take heed of. In what follows we update a broad range of labour market performance indicators to the latest available dates (last week in June).

The graphs that follow plot the five-year average (dotted line) for an indicator in each week of the year - the “norm” - alongside its five-yearly maximum and minimum values for the same week (grey shade). The equivalent 2020 weekly estimates (solid line) are then overlaid. The “excess” on the graphs is the difference between the solid and dotted lines. Any 2020 data outside the grey range is a notable departure from the norm. Adding these weekly excesses gives the “cumulative excess” of, say, unemployment. The dashed vertical lines on the graphs highlight the first registered Corona related death (week 5 of the calendar year) and the week the UK went into lockdown (week 12). The 2020 data currently run to week 26, the last week of June.

Using the most common metric of labour market performance - unemployment - not much can be observed over the first 26 weeks of 2020 that is unusual. Figure 1 shows that UK unemployment is typically lower in the weeks that run up to Christmas and higher immediately after. However, the weekly unemployment rate in the first 26 weeks of the Corona crisis was well below the average of the last five years.

Figure 1. Unemployment in 2020 Relative to the Norm

A similar story applies to the employment rate and self-employed and temporary jobs. No obvious departures from previous norms. The government's furloughing and other related schemes appear to have helped contain any widespread job letting up to this point.
But there have been changes. And for this we need to read part 2 of this posting

Figure 2. Employment in 2020 Relative to the Norm

Figure 3. Self-Employment in 2020 Relative to the Norm

Figure 4. Temporary Job Share in 2020 Relative to the Norm