Coronavirus in Scotland: Outlook for jobs market is 'horrendous'

Early evidence suggested the UK labour market was “experiencing an unprecedented fall in demand that will have an immediate, negative effect on the experience of those already in the labour market, those seeking to join it, and their households”.

The longer the lockdown went on, and the greater the economic damage, the harder it would be for people to get their jobs back, he said.

READ MORE: Sturgeon urged to continue 'united' approach after lockdown exit strategy

Prof Bell sounded the alarm in a joint paper with Prof David Blanchflower of Dartmouth College in the US, a former member of the Bank of England’s monetary policy committee.

Written for next week’s quarterly National Institute Economic Review. it also criticised the lack of up-to-date information on the labour market in the UK compared to the US. 

They said that led to too many “back-of-the-enevlope calculations”.

Their work coincided with a raft of dire economic indicators and forecasts.
Gertjan Vlieghe, a current member of the Bank of England’s MPC, said the economic shock could be “faster and deeper than anything.. in the past century, or possible several centuries”.

European Central Bank governor Christine Lagarde also told EU leaders the pandemic could cut up to 15 per cent of the bloc’s economic output.

The IHS Markit Puchasing Managers’ Index, which measures European economic activity plummeted again to 13.5 in April, with a figure below 50 indicating a shrinking economy.

READ MORE: Coronavirus: Social distancing to continue in schools when they gradually reopen

And in the US, another 4.4m people registered for unemployment benefits last week, bringing the total number of new jobless claims since mid-March to 26.4m, or 15% of the workforce.

The losses exceed the number of jobs created since the crash 11 years.

The jobless total is now double that in the Great Depression of the 1930s, although the smaller population meant America's 12.8m unemployed at the time were 24.9% of the workforce. 

Earlier this week, the Scottish Government’s chief economist warned Scottish GDP could shrink by a third during the lockdown, and by 12% for 2020 as a whole, three times the 4% loss in Scottish GDP after 2008/09.

In their paper, Professors Bell and Blanchflower said the US jobs losses showed a global recession had already “taken hold” since mid-March.

Although there has been no official UK labour market data since January because of a lag in official statistics, the authors said it was possible to estimate the impact on jobs on this side of the Atlantic based on the various occupations most at risk from Covid-19.

They assumed that in the short run around half of workers in those occupations would lose their jobs or be furloughed, with the Treasury paying for 80% of their wages.

They wrote: “What is coming in the labour market looks horrendous. We estimate that unemployment will rise by around 5m workers from 1.34m to over 6 m by the end of May. 

“This assumes furloughed workers are unemployed: official statistics may describe them as employed, but not working. Given that they are not allowed to work for their employer, this is a rather novel definition of employment. 

“That will take the effective unemployment rate to around 20 per cent - more than five times its current rate of 3.9 per cent - and quickly.

“Some of these workers will be furloughed and may return to work if and when there is a recovery, but this will only happen if their companies are solvent and have a market to sell into. 

“This becomes a tougher call the longer the lockdown persists. 

"In short: unemployment is set to rise in the UK by a lot.”

The pair said the UK Government should publish jobs data faster.

“We should be tracking this on a daily basis, not six months after it has happened.

“Canada and the US, for example, have timely data for us to work out what is going on their labour markets. The UK doesn’t, so we are left to make back-of-the-envelope calculations.”