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Institute for Employment Studies Briefing Note
Overall, the labour market remained weak as 2020 ended – with headline measures of employment continuing to fall and unemployment up slightly. However the deterioration in the labour market has slowed significantly, and more timely payroll data suggests that employment may have started to grow through December and January – driven by pandemic related jobs in health, test and trace centres and online sales.
However there are a number of worrying signs in today’s data, with clear indications that long-term unemployment is now on the rise – up by one third for young people in the last year alone – and significant increases in the number of people in involuntary temporary and part-time work. Data on employment for specific disadvantaged groups also suggests that progress in narrowing employment gaps has stalled and in some cases may be going into reverse. Employment for young people is particularly concerning, where new PAYE data suggests that falls may have been greater and any recent recovery in employment weaker than the Labour Force Survey had suggested.
Newly published data on labour market flows also suggests that hiring remains well below pre crisis levels and is recovering only very slowly. While this is to be expected given the lockdown restrictions, ultimately any roadmap out of the crisis in the labour market will need to involve getting hiring up to substantially above where it was last year.
So while the labour market ended the year in better shape than many of us had feared it would in the late summer, there is no room for complacency and plenty here that will give the Chancellor pause for thought as he finalises his Budget for next week.
In our Budget submission in early January we set out eight priorities for action in delivering a budget for jobs. Today’s figures reiterate this case, and in particular the need for measures to boost hiring; to support those most disadvantaged in the labour market; to improve progression, security and enforcement for those in low paid work; and to deliver on a meaningful Opportunity Guarantee for young people.