As many as 2 million people may still be on furlough in the UK

As the government’s furlough scheme starts to taper down in July, all eyes are on labour market statistics: will furloughs, which peaked at nearly 9 million in May 2020, convert into employment or unemployment? On one hand, there have been signs of a surprisingly robust labour market recently; on the other, there is still a risk that a substantial proportion of people on furloughs end up being laid off, rather than re-employed (at least straight away).

Unfortunately, official statistics on claimant counts, furloughs and unemployment lag behind real time. [For example, furlough data for May 2021 has just been published on 1st of July. Claimant count for June will be published in mid-July. Mid-July is also the publication date for unemployment figures for the three month period from March to May 2021.]

Fortunately, the Google COVID-19 Community Mobility Reports are published regularly and only lag behind a few days. [They also have the extra benefit of providing data at great geographic granularity — see analysis here.] As of today (July 2nd), data is available up till 27th of June. According to the latest indices, mobility to and from “workplaces” — an excellent predictor of the total number of furloughs in preceding months — improved, from a negative 27 to a negative 24. In other words, workplace mobility in June 2021 was “only” 24% below Google’s benchmark from February 2020.

Using a simple regression based on the previous months, this would suggest that the total number of furloughed employments may still have been above 2 million in June 2021. [I did test out various other predictors for furloughs, and the Google “workplaces” index — with an R-squared of 96% — was the best one of the options I looked at.] That estimate is higher than many others out there, which are mostly based on the latest data from ONS’s (excellent) COVID-19 Business insights and impact on the UK economy (BICS) survey.

Unfortunately, the Google mobility indices are less well correlated with claimant count— which, after all, is what we are worried about as the furlough scheme starts to be phased out. [And, which, by definition, has been less volatile, precisely due to the furlough scheme picking up much of the labour market slack during the pandemic.] In any case, the structural changes in labour market conditions in the next few months mean that such predictors might fail to provide meaningful estimates, anyway.

For what it’s worth, in the 2nd half of June, businesses surveyed by ONS for the BICS said on average that they expected 1% of their workforce to be made redundant in the next 3 months. If this happened “overnight” and if those people stayed unemployed, this would correspond, roughly, to an increase in the claimant count (as % of all economically active people aged 16+) to 8.4%, up from 7.4% in May 2021. Such a sharp rise is unlikely but suggests that we are far from out of the woods when it comes to employment. And that we will continue to watch the labour market figures closely in coming weeks.

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I help complex organisations make the right strategic decisions through innovative, insightful and incisive analysis and recommendations.

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Tera Allas

I help complex organisations make the right strategic decisions through innovative, insightful and incisive analysis and recommendations.