What a difference a year makes

Twelve months have passed since the labour market reacted to the pandemic induced slump in economic activity. The initial impact was most noticeable on the claimant count (the numbers claiming unemployment related benefit) and the HMRC’s payrolls data. The former posted a record monthly rise in April and peaked at 63,800 in May. That was more than double March’s figure of 30,500. Meanwhile the number of employees on the HMRC’s payrolls data tumbled by almost 12,000 over the same period. Unprecedented employment support measures, such as the Job Retention Scheme (JRS), steadied the ship, but 2020 was still a record year for redundancies.

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Labour market recovery or false dawn?

Northern Ireland’s latest labour market statistics smack of ‘nothing to see here…just move along’. Other than the record number of redundancies proposed in 2020 (11,000), there are few signs that the economy is in the midst of an economic crisis. Indeed, many of the indicators point to an improvement. For example, the unemployment rate and the number of individuals claiming unemployment related benefits is falling. Meanwhile the total hours worked and the number of employees on payrolls continued their upward trends. Talk of a labour market recovery, however, is premature. The Chancellor recently stated that the economy is going to get worse before it gets better. Similarly, the labour market will deteriorate before a sustainable recovery takes hold. Unprecedented employment support measures, such as the Job Retention Scheme (JRS) and the Self-Employment Income Support Scheme (SEISS), largely inoculated the UK and NI economies against a severe labour market shock. But once these measures are withdrawn a surge in unemployment in the second half of the year is inevitable.

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Tipping point for the NI labour market?

Resilience in the face of recession – Throughout the pandemic many key labour market indicators have not been sending out distress signals.  For example, the number of employee jobs in Q1 was a record high and unemployment remained close to its all-time low. That doesn’t sound like an economy in the midst of its deepest recession on record. Unprecedented levels of support, not least from the Job Retention Scheme, have prevented employment falling off a cliff. A range of interventions have meant that while the UK economy experienced one of the sharpest declines in output (GDP) of any economy in Europe, employment within the UK has (for now) held up better than almost all of its former EU counterparts. Incidentally, the Republic of Ireland is at the other end of the league table for both measures – i.e. the RoI has experienced one of the shallowest recessions in terms of GDP but one of the deepest declines in employment within the EU.

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Millenial Déjà Vu

Last year was one of the best years ever to enter the labour market in Northern Ireland. Jobs were aplenty across a broad range of disciplines. It was arguably the case that anyone who wanted to engage in work could find an opportunity to do so. Indeed there wasn’t the supply of labour to meet employers’ demand, making it a seller’s market. Employers increased salaries to address widespread skills shortages – particularly in ICT. Even lower and unskilled jobs saw significant pay growth with big increases in the National Living Wage. Fast forward a few months and the labour market landscape is unrecognisable. 2020 will prove to be a contender for the worst year ever to enter the labour market in Northern Ireland.

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At sixes and sevens?… (UK and NI new car sales fall to six and seven-year lows respectively)

Last year was a record year for both the UK and Northern Ireland labour markets. Employment has never been higher and unemployment (for Northern Ireland) has never been lower. Given these labour market conditions one would assume that consumer confidence must be strong too?  Not so. Previously having a job, or not having one, was a key determinant of whether a household or individual was in poverty. Over the last decade, however, a sustained period of below inflation wage growth and cuts to working-age welfare benefits has squeezed disposable incomes for those in work too.

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Jobs machine moving down a gear

Northern Ireland’s labour market continued to break records into the summer months. Unemployment fell to a new low of 2.8% and employment hit a record high of 779k jobs in Q2. That follows 14 consecutive quarters of growth. Looking at the private sector specifically shows a winning streak that is even longer, extending to five years. But can it last? There are signs that the jobs machine is slowing. The number added in the latest quarter marked a three-and-a-half year low. Meanwhile, services, the largest sector of the economy, saw its rate of growth almost grind to a halt.

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