Employment down, but economic inactivity up

A new ONS survey makes sobering reading on the move from employment to economic inactivity.

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The number of employees on UK payrolls fell by around 730,000 or 2.5% between March and June, according to a new study from the Office for National Statistics with economic inactivity – people out of work but not currently looking for work – up significantly.

The number of people who are inactive but not seeking work or who are temporarily away from work for coronavirus-related reasons without earnings increased by 1.03 million to 2.13 million. The ONS says this increase of “people who are around the fringes of unemployment” may explain why official unemployment figures have not increased.

Those who are economically inactive and who want a job increased by 235,000 on the year and 218,000 on the quarter, while those who do not want a job decreased by 362,000 on the year and 135,000 on the quarter. The ONS says this suggests that people who want employment were not looking for work during the three months to June. The reasons for the increase in economic inactivity may include problems with childcare or care provision during the pandemic.

The ONS says the 2.5% fall in employment was the largest quarterly decrease since May to July 2009 and affected both men and women. Older and younger workers were particularly affected as were the self-employed and part-time workers while the number of full-time employees largely offset the decrease. Redundancies increased by 30,000 on the year and 27,000 on the quarter to 134,000 – the highest level since February to April 2013, but well below that seen during the 2008 downturn.

The number of people aged 16 to 24 years in employment decreased by 100,000 to 3.72 million, while those aged 65 years and over decreased by a record 161,000 to 1.26 million. This was partially offset by those aged 25 to 64 years, who increased by 41,000 on the quarter to 27.94 million. The number of self employed people was 4.76 million, a record 238,000 fall on the previous quarter. The number of people who have been unemployed for up to six months is seeing the largest increases, up 150,000 over the year to 943,000.

Hours worked have continued to fall, reaching record lows both on the year and on the quarter. The number of zero hours contracts has increased by 156,000 (or 17.4%) to a record high of 1.05 million. Between January to March 2020 and April to June 2020, average actual weekly hours fell by a record 5.6 hours on the quarter to a record low of 25.8 hours.

A large number of people are estimated to be temporarily away from work, including furloughed workers. There were approximately 7.5 million people temporarily away from work in June 2020, with over three million of these being away for three months or more. New analysis shows that the youngest workers, oldest workers and those in manual or elementary occupations were those most likely to be temporarily away from paid work during the coronavirus pandemic. There were also around 300,000 people away from work because of the pandemic and receiving no pay in June 2020.

Vacancies are showing increases in the latest period – up 10% on the previous quarter, driven by smaller businesses, some of which are reporting taking on additional staff to meet Covid-19 guidelines.

Those claiming work-related rose to 2.7 million in July 2020, an increase of 116.8% since March 2020. This includes both those working with low income or hours and those who are not working.

Pay fell for all measures in the three months to June 2020, down by 1.2% on the year. However, for the sectors of wholesaling, retailing, hotels and restaurants and construction where the highest percentage of employees returned to work from furlough, there is a slight improvement in pay growth for June 2020.


The Institute for Employment Studies called the figures a “virtually unprecedented reversal”, but said they would have been far worse without the government’s Job Retention Scheme and self-employment income support. It anticipates rising unemployment as the support schemes come to an end and more of those out of work start looking for new jobs. It called for urgent action on jobs, including the new Kickstart scheme for young people and the expansion in support available through Jobcentre Plus and employment services announced earlier by the Government, but said it was likely that more measures would be needed in the autumn spending review to support hiring and new job growth.

IPSE, the Association of Independent Professionals and the Self-Employed, has said the drop in self-employment is “almost certainly” because of gaps in self-employed support during the coronavirus crisis compared to the more comprehensive employee support. It also reported in its most recent Confidence Index that self-employed quarterly incomes have dropped by 25 per cent after a record fall in the amount of work they are able to secure.

The drop in income was driven by a record fall in the average number of weeks freelancers were able to work during the period. Freelancers were also pessimistic about the future: 61 per cent said they expect to see their day rates fall over the next 12 months – by an average of 11 per cent.

Meanwhile, TSB has told over 920 frontline staff they will have their jobs phased out next year with cashiers having to retrain, change roles or take voluntary redundancy. The bank blames a steep decline in branch visits because of the coronavirus lockdown, with more people using online banking but visiting branches for more complex reasons.

And a survey by PwC has found that almost nine in 10 UK chief executives expect the pandemic to prompt a permanent shift towards remote or hybrid working. The survey also found that UK business leaders were more likely than their international peers to provide financial assistance to staff and support the mental health and wellbeing of workers.

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