Jobs after COVID-19
* Join our weekly 30-minute “COVID-19” webinar this Thursday at 13:00 BST. We’ll cover the latest health and economic impacts and our guest, risk advisory partner Peter Gooch, will discuss the privacy considerations for businesses as people return to work. To register for this week’s webinar, on 4 June, please visit: https://event.on24.com/wcc/r/2362700/4CAA6561525783166136C8DB27954AF8
* Today we are launching our “COVID-19 Economics Monitor”, which is available here: https://www2.deloitte.com/uk/en/pages/finance/articles/covid-19-economics-monitor.html
The monitor will be updated weekly and features a changing set of charts and tables illustrating key economic themes from the COVID-19 crisis and our forecasts for UK GDP growth over this year and the next. We also share links to important data sources and recent articles that we have found interesting and informative.
* The impact of the lockdown on the UK job market has been dramatic. Last month about a third of the UK’s 33m workforce were being supported by the government, through the furlough scheme, self-employment income support or Universal Credit. A further third were working from home and a final third were at work.
* The impact has been not uniform. People under-30 or over-60, in part-time work or on low pay are the most likely to have been furloughed or made redundant. Conversely, those aged 35 to 59, on higher pay or in full-time work are the most likely to be working from home and to have remained in employment. Jobs in retail, hospitality, leisure and travel have been hardest hit. Manufacturing and construction businesses, though not required to cease operations during the lockdown, have also cut jobs.
* There are areas of growth too, mainly in health and social care, grocery and online retail. According to research firm Nielsen, over a four-week period during the lockdown 7.9m UK households ordered groceries online, up from 4.8m last year. The majority of vacancies currently posted on the Department for Work and Pensions “Find a Job” website are in healthcare, nursing, social work, teaching, warehouse and logistics.
* The lockdown imposed a nationwide experiment in working and consuming remotely. The experience has given an impetus for the organisational changes needed to exploit digital technologies.
* Before the crisis, homeworkers tended to be older, hold more senior roles and were concentrated in sectors like IT, professional services and real estate. The lockdown has widened the age range and skills of those who work from home. Some service sectors like retail, education, entertainment and healthcare have adapted rapidly in order to continue operating. Consider, for instance, the almost wholesale adoption of telephone consultations with GPs or the doubling of online grocery purchases. Some changes will become permanent.
* Adam Ozimek, chief economist at freelancing platform Upwork, notes that the share of US employees working remotely has quadrupled during the pandemic to 50% of the workforce. 62% of US recruiters expect a permanent increase in the portion of their workforce operating remotely.
* The disruption to jobs caused by COVID-19 comes after a decade of strong employment growth. From 2012 to early 2020 the unemployment rate fell from over 8% to below 4% while the employment rate rose from 70% to a record 76.6%. For all the problems of austerity, low productivity and weak wage growth, the UK economy did well in creating work.
* A huge contraction in the economy and continued social distancing mark the end of that period of plentiful work. Between 12 March and 9 April the proportion of people claiming out of work benefits shot up from 3.5% to 5.8%. Unemployment will head much higher still, though the damage so far has been mitigated by the furlough scheme. Goldman Sachs estimates that the unemployment rate would have reached the 25% by June without the scheme.
* Major downturns contribute to a reshaping of the jobs market. In the wake of the financial crisis public sector employment shrank while the proportion of the workforce who were self-employed or working in private equity-owned business soared. How will the pandemic change the UK jobs market?
* The events of the last three months are likely to accelerate some long-term trends including the decline of high-street retail jobs and growth in employment in IT, education and healthcare. The rapid job creation seen in the 2010s in accommodation and food services is unlikely to repeat itself. Conversely the decline in public sector employment underway since 2010 is likely to reverse as the state assumes a greater role. The success of online retail will reinforce demand for workers in warehousing and transport. Amazon has said that 70% of 175,000 new US hires it added in March and April in response to the boom in online orders will become permanent employees. Rectifying vulnerabilities revealed by the crisis will also create new jobs, notably in public health and the production of medical and protective equipment.
* The jobs market of the 2020s will be reshaped by other factors, notably a new, post-Brexit immigration regime and an ageing population. The rapid growth in the overseas-born labour force in the last 20 years is unlikely to be repeated, although the major contribution of foreign workers to the NHS and the wider economy will remain a key factor in immigration policy.
* For some businesses productivity – and profits – are likely to suffer as operating models designed for a pre-COVID world adjust to social distancing and enhanced hygiene standards. But in the long term an acceleration in technology adoption, and a necessary reorganisation of work, would raise productivity. The UK’s poor productivity performance partly reflects a “long tail” of low-productivity firms that do not implement the organisational changes required to exploit technology. The lockdown could be a catalyst for some to change.
* By international standards the UK has a very flexible labour market, one which, by the end of last year, had helped bring the unemployment rate to the lowest level in almost 50 years. That flexibility will not be enough to prevent a sharp rise in unemployment in the coming months. But it will be a source of strength as the UK seeks to innovate and grow its way out of the COVID-19 downturn.
OUR REVIEW OF LAST WEEK’S NEWS
The UK FTSE 100 equity index ended the week up 2.4% at 6,077 on indications that economic activity was resuming.
COVID-19 impacts
* An additional 2.1m Americans filed an initial jobless claim, taking the total since mid-March to 40.8m
* The World Health Organization warned of an “immediate second peak” if measures were lifted too soon
* Only 197 cars were manufactured in the UK in April, the lowest level since the second world war
* Office for National Statistics research suggests that the number of online job adverts has fallen by around 43% since early March
* The International Energy Agency predicted that 2020 would see a record fall in energy investment, forecasting a 20% fall this year
* The European Banking Authority expects European banks to lose up to €380bn as a result of economic disruption but judged that banks had sufficient capital to absorb losses
* The Indian economy slowed in the first quarter, growing 3.1% compared to the same period last year
* Retail sales in April fell by 20.2% in France, 31.6% in Spain and 6.5% in Germany
* Retail sales and industrial production in April fell by more than was expected in Japan suggesting a deeper recession than first thought
Policy response
* UK chancellor Rishi Sunak announced that firms will have to pay National Insurance and pension contributions for furloughed workers from August
* Firms will then have to start contributing 10% of pay in September and 20% in October, the last month of the scheme
* Workers will be allowed to return part-time from July, with firms paying wages
* Mr Sunak also announced an extension of support for the self-employed
* German airline group Lufthansa rejected a €9bn bailout from the German government after the EU competition authority ordered that the airline would have to give up prime landing slots as a condition of the deal
* Germany will allow its citizens to travel in Europe from 15 June, the FT reports
* French president Emmanuel Macron announced an €8bn package of assistance for the country’s car industry conditional on not moving production abroad
* French carmaker Renault is to cut 15,000 jobs worldwide
* The UK launched their test-and-trace service and banned the sale of home-antibody tests due to concerns over their accuracy
* Groups of up to six people will be allowed to meet outdoors in England while two households can now meet in Scotland as restrictions ease
* South Korea strengthened its social distancing restrictions following a spike in new cases
Business news
* US investment-grade companies have raised over $1tn in debt so far this year, roughly double the amount seen in the same period in 2019
* Social media giant Twitter placed warnings against misleading tweets from US president Donald Trump. The president threatened to retaliate
* Contactless payments have boomed as businesses discourage cash payments for hygiene reasons
* Research by Virgin Money suggests there has been an increased take-up of online banking services, which may persist beyond the lockdown
* Two astronauts were launched into orbit atop a SpaceX rocket, a first for the private sector
* Broadcaster HBO launched its HBO Max streaming offering into a crowded market in the US
* The English Premier League is to restart on 17 June
* More than 70 UK travel companies wrote to ask the home secretary to abandon plans for a two-week quarantine for travellers, warning of its impact on the sector
* Nissan renewed its commitment to its Sunderland plant as it announced plants in Barcelona and Indonesia will close
Politics
* European Commission president Ursula von der Leyen proposed that the EU collectively borrows €750bn to respond to the economic crisis, partially funded by new pan-European taxes
* A contested budget negotiation will follow. Whether the borrowing is used for loans or grants to member states is a key sticking point
* UK polls saw a sharp drop in support for the Conservative Party following controversy over No. 10 advisor Dominic Cummings
* Huawei CFO Meng Wanzhou lost her bid to halt her deportation from Canada to the US on fraud charges. China claims the charges are political
* The US, UK, Australia and Canada strongly condemned China’s move to impose unilaterally impose “national security” legislation on Hong Kong
* US secretary of state Mike Pompeo announced that the US no longer sees Hong Kong as being autonomous from China, imperilling preferential trade and financial ties
* The UK government will offer a path to British citizenship for up to 300,000 residents of the city holding British National (Overseas) passports if China persists with the legislation
* US president Donald Trump announced that the US would withdraw from the World Health Organization in another blow for multilateralism
* The EU’s chief negotiator Michel Barnier indicated that the EU would consider an extension of up to two years to the transition period
* Robert Keen, head of the British International Freight Association, warned that the government was falling behind in training the new customs officials needed by 31 December
And finally… a ten-year-old boy has been sleeping in a tent since the beginning of lockdown to raise money for North Devon Hospice – An in-tents challenge