A positive labour market outlook could mask a gloomy summer for some young people

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Today’s labour market figures paint a broadly positive picture, with a sharp increase in the number of employees on payroll in June, redundancies back down to pre-pandemic levels and vacancies at levels up and above what they were in the first months of 2020. However, long term unemployment remains a problem among young people that Government should do more to address, especially as the Kickstart Scheme is planned to end before it's had the opportunity to realise its potential.

Steep rise in payroll employees in June, but still short of pre-pandemic levels

The number of employees on payroll increased by 356,000 in June, according to the HMRC PAYE flash estimate. There were particularly large gains in accommodation and food services (94,000 employees), wholesale and retail (29,000) and arts and entertainment (24,000 employees). However, there are still 206,000 fewer employees on payroll than at the onset of the pandemic.

Figure 1: Total number of employees on payroll between March and June 2021, with pre-pandemic baseline

Source: HMRC Pay As You Earn Real Time information (15 July 2021), including early estimates for June.

Vacancies now exceed pre-pandemic levels

The easing of restrictions in May and the concomitant increase in economic activity is also reflected in the number of vacancies, which are up by 39% in March – May 2021 compared with the previous quarter. The current 862,000 open job listings even exceed the pre-pandemic January-March 2020 quarter by 77,000 to reach levels last seen in 2018.

This recovery in vacancies is seen across all sectors, with particularly strong gains in sectors that have resumed activity since the easing of restrictions. In accommodation and food service activities, the number of vacancies rose to 21% above pre-pandemic levels. Arts and entertainment approached early 2020 levels and retail also saw significant gains. However, these sectors of the economy, and the local economies which depend on them, remain vulnerable to any further restrictions or lockdowns that may follow as a result of the new surge in Covid-19 cases.

Young people are increasingly moving into employment, but a substantial group of long-term unemployed people face risks

It’s encouraging that employment among young people (aged 18 – 24) has increased by 2% on the quarter, representing 61,000 more young people in employment in March – May 2021. This may be due to the recent reopening of sectors such as hospitality and retail, and which usually employ a large share of young workers. There has also been a fall in unemployment among this age group over the same period, but this is largely driven by a decrease in short term unemployment, which refers to those out of work for less than 6 months.

Concerningly, long term unemployment among young people remains high: there are now 92,000 young people who have been unemployed for longer than 12 months. This indicates that young workers are still finding it difficult to access labour market opportunities. Young people who are out of work face distinctive struggles in finding short term employment, and previous Work Foundation analysis has highlighted the potentially significant scarring effects that unemployment can have on their mental and physical health and earning and progression prospects in the longer term. It is therefore important that this group receives more targeted support.

Government has already prioritised support for young people via the Kickstart Scheme, which provides fully-funded 6-month work placements for 16-24-year olds who are at risk of long-term unemployment. Despite an initial delay, the programme now seems to be gaining momentum. By early June, 138,000 jobs had been advertised and 31,000 Kickstart placements had started. However, the Scheme was budgeted to support as many as 300,000 placements, which the current number falls far short of, and yet is due to end by December 2021. The Department of Work and Pensions should consider extending the Scheme into 2022, to give more young people the opportunity to participate.

Furthermore, Kickstart is currently only available for young people who are claiming Universal Credit, which excludes many young people from participating in an opportunity that may greatly benefit them. The eligibility requirements should be widened to maximise participation among all young people to ensure more can access better, more secure jobs as the economy recovers.

Additionally, Government should reverse its decision to remove the £20 uplift in Universal Credit payments. Much remains uncertain around potential further tightening of restrictions following the recent surge in Covid-19 cases, and many claimants will face heightened insecurity in the period ahead.


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