Are we there yet?…Yes and No

One of the key questions asked in any recovery is ‘are we back to where we were before the downturn struck?’ For the most recent recession the crucial benchmark is pre-pandemic levels / rates of activity / employment etc.  The latest batch of labour market statistics from NISRA highlights further improvements on the road to recovery.  But in response to the question ‘are we there yet?’ as far as the labour market recovery is concerned, the answer is both yes and no. It all depends what aspect of the labour market you focus on. For example, Northern Ireland’s economic inactivity rate (25.9%) has returned to pre-pandemic (Q4 2019) levels but the employment (71.1%) and unemployment rates (3.8%) have not.  

The most closely watched monthly labour market statistic is the HMRC PAYE payrolls data. This is a timely indicator of how many employees are on employers’ payrolls. As lockdown restrictions have eased there has been a marked increase in employee numbers. Indeed, June’s figures eclipsed the pre-pandemic payrolls high that occurred in February 2020. July witnessed the largest monthly jump in payrolls (+7,927 or +1.1%) since the series began, taking the total number of employees to 762,596 – a fresh record high.  That is up 27,000 employees from November 2020’s pandemic low and 9,600 (+1.3%) above February 2020’s pre-pandemic high. 

So are we there yet? As far as payrolls data is concerned it is a resounding yes and some! However, there is a statistical wrinkle here that inflates the true measure of employment and the amount of work being undertaken. The payrolls data includes staff who have been furloughed (i.e. availing of the Job Retention Scheme) but many of whom are still doing no work whatsoever. As of the end of June there were 44,000 employees on furlough. The current figure will be even lower as the scheme nears its September expiry date and more employees return to work as lockdown restrictions ease. Nevertheless a proportion of these employees will ultimately move into unemployment / economic inactivity. How many remains to be seen.

The encouraging news that the number of payrolled employees has never been higher is tempered by dismal news on the self-employment front. The number of self-employed fell to 91,000 in Q2 2021 – a 22-1/2-year low.  That’s down 46,000 or 34% relative to pre-pandemic levels. Many self-employed have switched status or jobs and become employees.  However, overall employment (employees + self-employed) in Q2 2021 remained 3.0% below pre-pandemic levels which equates to 26,000 fewer individuals in work. The self-employment and furlough issues also explain why the total number of hours worked in Northern Ireland is still recovering but not yet recovered. In Q2 2021 the total number of hours worked in Northern Ireland was 5.5% below Q4 2019 levels (pre-pandemic). That means just over two-thirds of the decline in total hours worked following the pandemic has been recovered so far. Only when this statistic returns to pre-pandemic levels can we be more authoritative that the labour market has truly recovered in a meaningful way. In the meantime, skills shortages across the length and breadth of the economy represent one of the biggest challenges facing employers in the months ahead.

Overall, Northern Ireland’s labour market statistics are showing several signs of improvement. Payrolls data may have returned to pre-pandemic levels but several indicators have a very long way to go before we can declare mission accomplished i.e. all labour market indicators return to pre-pandemic levels. 

So what is the latest batch of labour market statistics from NISRA telling us?

Ticking-up – 2020 was a record year for redundancies and some of those proposed job losses are continuing to land in 2021 with 700 during the second quarter. That compares with almost  1,100 in Q1. July saw 250 redundancies following 300 in June. Proposed redundancy numbers jumped (+73%) from 490 in June to 850 in July, marking the highest number of proposed redundancies in 10 months. One-in-four of these proposed redundancies were in manufacturing with a similar proportion within the wholesale and retail trade sector. These level of redundancies remain well down on last year’s levels.

Trending downwards – Northern Ireland’s claimant count – which includes those on Jobseekers Allowance  (JSA) and Universal Credit claimants who were claiming principally for the reason of being unemployed – has generally been following a downward trend since May 2020’s peak of 63,800. July saw the fifth successive monthly fall in claimant numbers with the total falling by 800 to 50,000. That marks the lowest total since the pandemic hit, but remains well above the pre-pandemic level of less than 31,000. 

Two up, one down – Northern Ireland’s unemployment rate increased from 3.5% in Q1 to 3.8% in Q2. That is the second-lowest unemployment rate within the UK and compares with a national average of 4.7%.  This unemployment rate looks and sounds more impressive than it actually is.  A low unemployment rate occurring alongside a low economic inactivity rate and high employment rate would be impressive.  Unfortunately Northern Ireland has the worst of both worlds as far as these indicators are concerned. While there have been improvements in the latest quarter (i.e. employment rate up and economic inactivity rate down), Northern Ireland still has the highest economic inactivity rate within the UK (25.9% versus UK 21.1%) and the lowest employment rate (71.1% versus UK 75.1%). The good news is that NI’s economic inactivity rate has returned to pre-pandemic levels. However, both the unemployment and employment rates remain below their pre-pandemic levels (Q4 2019) of 2.4% and 72.4% respectively.  

Mission accomplished – The best indicator of employees in employment is the HMRC PAYE Real Time Information System data.  This covers employees on payrolls. July witnessed the eighth successive monthly rise in employee numbers with an additional 7,927 added last month alone.  That marked the largest monthly rise in the series to date taking the total to a fresh record high of 762,596. Since November 2020’s low local payrolls have increased by over 27,000. As a result, there are 9,600 more employees (+1.3%) on payrolls than prior to the pandemic. However, these payrolls include furloughed staff.  If these employees were excluded (44,000 as of end of June 2021) the payrolls figures would be still well below pre-pandemic levels.

Payrolls up, self-employment down – Payrolls may be at a record high but self-employment and overall employment are not.  According to the Labour Force Survey there were 855,000 in employment in Q2 2021 which compares with 876,000 before the pandemic (Q4 2019). The number of self-employed continues to fall hitting 91,000 in Q2 – a 22-1/2-year low. That’s down 46,000 / 34% from pre-pandemic levels. Returning to pre-pandemic levels of self-employment is likely to be a long, slow process.  

More hours – Signs of a labour market recovery are evident in the hours worked data. There were 27.5 million of weekly hours worked during the period April – June 2021.  That is up 5.0% q/q but Northern Ireland is still working 5.5% fewer hours than occurred in Q4 2019 before the pandemic hit and 7.1% below Q2 2019’s peak. That means just over two-thirds of the decline in total hours worked following the pandemic has been recovered so far. Clearly the fact that between 44,000-109,000 individuals were on furlough during this three-month period is impacting on this figure.

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