Economy

Coronanomics

Expect considerable focus in 2021 on the pandemic’s impact on employment. Already it is apparent what types of jobs and locations could be hardest hit, with city centres likely to bear the brunt. London, usually the powerhouse of the economy, seems set to be the most affected region.

The outlook may be downbeat, but pay is predicted to go up, with the Office of Budget Responsibility (OBR) forecasting an average increase of 2.1% this year.

The OBR is also predicting that unemployment will peak at 7.5% in the second quarter of 2021– which would represent a sharp rise on the third quarter of 2020. At that time the unemployment rate was already moving upwards, reaching 4.9%, against 3.7% in the same period of 2019. This equates to 1.69 million people, an increase of 411,000 over the 12-month period.

More timely numbers underline the growing size of the problem. HMRC data, for example, revealed that there were 819,000 fewer people on payrolls in November than at the start of the pandemic. During the third quarter, redundancies soared to a record high of 314,000, an increase of 181,000 on the previous quarter.

The extension of the furlough scheme until 30th April 2021 has softened the blow somewhat, but more businesses have announced redundancies. The pain is not being equally felt: the aviation, hospitality and retail sectors have made the largest job cuts. Other employers are reluctant to hire amid the uncertainty.

London has been at the centre of the crisis: a large proportion of employment depends on retail and hospitality. A higher proportion of workers in the capital have been furloughed than in other areas; there has been a sharper drop in job vacancies and a jump in work-related benefit claims.

Despite these conditions, average total pay (including bonuses) still went up by 2.7% in the three months to the end of October 2020. Earnings in the public sector showed the highest growth. But earnings fell in several sectors: construction, hotels, manufacturing, restaurants, retail and wholesaling. The furlough scheme played a key role in supporting earnings in 2020. It is expected to help cushion the employment market until the roll-out of vaccines start to provide population immunity.

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