One of the great success stories of the UK economy over the last ten years has been its labour market, with more Britons in work than ever before.
The employment rate in the three months to January 2020 was at a joint record high of 76.5 per cent. Meanwhile, unemployment was unchanged at a near-record low of 3.9 per cent.
You have to go back to the 1970s when the Office for National Statistics (ONS) first started recording data to find the UK labour market in such a strong position.
But behind that strength are certain fragilities, which the COVID-19 pandemic has brought to light.
In the 1970s, there was no such thing as a zero-hour contract, wages were generally higher than the cost of living and the number of self-employed was nowhere near the 5 million it is today.
It could be argued that the record levels of employment we are seeing in the UK today are somewhat inflated by the new ways in which people work.
There are many upsides to having a more fluid, flexible and agile workforce. But what the coronavirus crisis has highlighted is that there are also downsides such as wage insecurity, underemployment and rising levels of household debt.
It is a good thing that so many people are in work in the UK, but it is also true that many of them are very highly leveraged and will struggle to sustain any prolonged period of unemployment.
That is why Government is keen to protect as many jobs as possible and has announced two revolutionary schemes to support livelihoods during this crisis.
The Coronavirus Jobs Retention Scheme is designed to support employers by offering to pay 80 per cent of the wages of furloughed employees for at least three months, up to £2500 per month.
The Self-employment Income Support Scheme is similarly available for three months, up to a maximum of £2500 per month or 80 per cent of trading profits, for those who have lost income due to COVID-19.
These initiatives are without precedent in British political history. But even with them in place, many think tanks believe that UK unemployment will double to 8 per cent or even higher.
Early indicators would seem to reinforce this. In the first two weeks of the Government lockdown, nearly a million people have applied for universal credit.
In the US, the numbers are even more dramatic. Over the last fortnight, US jobless claims rose by almost ten million. To put that number into context, only 9 million American jobs were lost in the whole of the 2008 financial crisis.
One might ask why these numbers are so high given the size and scope of the stimulus packages announced on both sides of the Atlantic.
It’s an important question, which speaks to both the speed at which this crisis is unfolding and the fragility of labour markets that, at the beginning of this year, seemed stronger than ever.
Never before has there been whole sections of the economy where the level of activity is zero. In the UK, thousands of businesses are currently unable to trade. That means there is literally no money coming into the business.
But what is critical where employment is concerned is that this crisis has hit hardest in the parts of the economy with the least labour market resilience.
The retail, leisure and hospitality sectors may be labour intensive, but they are also where zero-hour contracts, low pay and self-employment are the most prevalent.
We therefore have this problem where the part of the workforce most in need of Government support is the part which is least equipped to access it.
For the vast majority of those working in the gig economy, for example, Government support will be difficult to reach.
That is why we have seen such a steep incline in the number of benefits claimants, and I would expect this to rise even further.
The Government’s policies are massive in scope and as generous as to be found anywhere. But there are still going to be many people who suffer.
It’s critical to keep unemployment as low as possible. Even at something like 8.5 per cent – the rate last reached in 2011, joblessness is a huge lag on economic recovery.
That’s because every person out of work is a consumer who is not spending, which means that businesses don’t invest, and activity remains sluggish.
When this lockdown ends, we’re going to need massive consumption of products and services across all parts of the economy.
If we are to crawl out of the hole COVID-19 is pulling us into, we need to keep Britain working.