What impact is Coronavirus really having on unemployment in Wales?

Economy A photo of a Welsh Valleys town
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ViewsJuly 16th, 2020

The latest labour market data paints a less devastating picture than many may have expected in Wales.

But as Huw Anslow and Steffan Evans set out there’s plenty of reasons to be cautious.

“Unemployment rate dips in Wales during coronavirus lockdown” read the headline on BBC Wales’s website this morning. It’s a headline that will have had many scratching their heads over their cornflakes. How, during a global pandemic has the unemployment rate in Wales continued to fall?

Falling unemployment

In the three months between March and May 2020 the unemployment rate in Wales stood at 2.7%, down 1 percentage point on the previous quarter and 1.2 percentage point on the year previously. Over the same period the employment rate for 16-64-year olds also increased, rising by 0.8 percentage points. So what is going on?

First, it’s important to treat the data with caution. Some have argued that the special nature of this crisis means that the data on the unemployment rate does not accurately capture what is going on in the UK. Second the impact of the UK Government’s furlough programme, has, for now, kept thousands of people “in work” in Wales despite them not actually working for the duration of the crisis. The latest data suggests that there are 378,000 workers in Wales on the Job Retention Scheme, keeping many in jobs that may otherwise have already been lost. As some sectors now reopen some may also be recruiting more workers contributing to an improving picture.

Out of work benefits

While the unemployment rate has remained encouragingly low through the duration of the crisis, another data source has suggested that things may be far worse in reality. April and May 2020 saw a significant increase in the number of people claiming out of work benefits. This upward trend has come to a halt in the most recently published data with 116,000 people claiming out of work benefits in Wales in June 2020 compared to just over 118,000 in May 2020.

The UK Government’s furlough programme and support for self-employed workers may again be partly responsible for this. In June those people who were hardest hit by the immediate impact of lockdown had already made their applications for support, whilst the furlough scheme had been well established to protect the jobs in business that may otherwise have been looking at laying off staff. There have been some warnings, however, that whilst the data on the unemployment rate may have been underestimating the impact of Coronvairus on jobs, the claimant count data may have been overstating its impact which could lead to significant fluctuations over coming months.

Whilst there may be some concerns about the accuracy of the claimant count data it does highlight that there are certain groups of people in Wales and certain geographic areas that may be finding things harder than others.

Young people appear to have been hit particularly hard by the pandemic. The number of 16 to 24 year olds claiming out of work benefits in Wales is 117% higher than in June 2019, compared with a 113% increase for 25 to 49 year old and a 95% increase for the over 50s. Especially concerning in this context is that whilst the number of people claiming out of work benefits aged over 25 fell slightly in June 2020 compared with May, the number of young people claiming out of work benefits is continuing to rise, though at a slower pace than the previous two months.

The modest reduction in the number of people claiming out of work benefits also seems to have benefited more men than women. Whilst the number of men claiming out of work benefits fell by 2,000 in June, the number of women claiming out work benefits remained unchanged. Despite this, the number of men claiming out work benefits has increased faster than the number of women compared with the same period last year.

Perhaps the most worrying information of all in the latest data can be found when breaking it down to look at the picture at local authority level. The claimant count data suggests that over 9% of men aged 16 and above are claiming out of work benefits in three local authorities; Newport, Merthyr Tydfil and Blaenau Gwent, with more than 8% of men in a further three local authorities doing the same.

The problems on the horizon

Whilst the latest data released today is undoubtedly more positive than many may have feared there are storm clouds appearing in the distance. Perhaps the most significant of these is the winding down of the furlough scheme.

The true impact of the furlough scheme on keeping people in work can be seen when looking at the number of hours worked. The total number of actual hours worked by people aged 16 and over has seen its largest ever annual fall across the UK. If it were not for the furlough scheme, such a reduction would have almost certainly led to a spike in unemployment. Whilst the UK’s furlough scheme has kept people in jobs for now, unless the economy recovers quickly and it’s safe for people to return to work, many workers on the furlough scheme may see their jobs come under threat as the programme is removed.

As outlined in our recent report the threat of redundancies is especially great in industries such as accommodation and food services which have been hit hard by the crisis. With well-known brands particularly in hospitality and retail now beginning to announce major redundancy plans the need for long term government support for the economy is becoming clearer.

You can keep up to date on developments in the labour market by signing up for our fortnightly Fair Work Focus.

Huw Anslow is a Project Officer at the Bevan Foundation and Steffan Evans is a Policy and Research Officer at the Bevan Foundation

Tagged with: Coronavirus

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