Is the furlough scheme masking the real economic impact of the pandemic?
Written by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown
It’s become increasingly clear that the government’s Coronavirus job retention scheme is masking the damage wreaked by the pandemic on jobs and the wider economy. The three months between April and June will be remembered as an unprecedented period of inactivity. The whole of the UK was under lockdown and the restrictions only began to significantly ease towards the end of the quarter.
Today’s ONS data from the Labour Force Survey reflects the impact of the government’s furlough scheme on the labour market as the research shows only a slight decrease in the number of households with all adults in employment and a small decline in workless households*, as the jobs of more than one in four UK workers were mothballed.
However, during the same period the UK economy also fell into a steep recession with GDP tumbling by 20.4%, double the rate in the US, and second only to Spain in Europe. The unwinding of the furlough scheme has been followed by announcements of significant job losses across multiple sectors, particularly travel and retail.
Given the challenges facing the UK economy we expect this trend to continue and the next sets of ONS data to more accurately reflect the number of households without work.
- *Compared to the most recent quarterly data available. Between October and December 2019, 12.8 million (60.6%) of the 21.1 million households in the UK were classed as working. A further 5.5 million (25.9%) were classed as mixed and 2.8 million (13.5%) classed as workless.
- Within the 13.5% of workless households, 85.9% of those were economically inactive (with nobody in the household participating in the labour market).
- Of the estimated 20.9 million households (where at least one member is aged 16 to 64 years) in the UK, 12.5 million (59.6%) had all household members aged 16 years and over in employment during April to June 2020.
- There were an estimated 5.7 million households (27.3%) with a mix of at least one working and one workless adult.
- There were an estimated 2.7 million households (13.1%) where no member of the household was in employment.