Unemployment has stabilised but there will be economic pain ahead

There are high levels of business optimism. Survey after survey has told us this, from reports from Deloitte on large companies to evidence from the Federation of Small Businesses.

Consumer savings are at an all-time high. People are itching to get out and spend the money they have been forced to accumulate. All in all, a very bright picture. But things might not quite be as they seem at first glance.

Sanjeev Gupta’s problems in the GFG Alliance are putting some 5,000 jobs at risk in the steel industry following the collapse of Greensill Capital. A credit crunch threatens the future of Britain’s second largest oil refinery at Stanlow in Cheshire, owned by Essar Energy.

These could be put down to problems specific to the complex structures and dealings of the conglomerates behind these plants – a mere splash of gloom in the overall rosy picture.

But, a vignette from the opposite end of the scale to these giant producers suggests that not everyone has got the message of optimism.

A small London-based consultancy I am working with is expanding. The recession has indeed been good to some.  They placed an advert on their website for an additional office manager. The response was overwhelming. So much so that the ad had to be taken down within 24 hours of it appearing. The existing volume of applicants was already too much to cope with.

This was completely unprecedented. Even in this prosperous part of London, there seems to be either a lot of hidden unemployment or fear of being made redundant in existing jobs.

In the wider labour market, British Gas has created a furore over its plans to change the longstanding contracts of some of its engineers, worsening the terms and conditions. Hundreds of employees who refused to sign up to the new terms have lost their jobs, though most have gone along with the changes.

British Gas is by no means alone. The Trades Union Congress claims that almost one in ten workers have been subjected to fire-and-rehire practices, driving down pay and lengthening working hours.

Official data from the Office for National Statistics indicates that the Covid crisis did indeed weaken the labour market.  Compared to just over a year ago, employment levels have fallen by over 1 per cent, though still not quite as much as during the financial crisis. Unemployment has also gone up by 0.9 per cent.

The latest data indicates that the labour market is stabilising.  Unemployment, for example, is marginally down in the current quarter compared to the previous one.

But there seems to be real concern in the workforce about the viability of many businesses once Rishi Sunak’s various job preservation schemes come to an end.

In these circumstances, a vacancy in a small business which is growing looks super-attractive. Skilled workers accept a worsening of their terms and conditions which they would otherwise reject out of hand.

Business surveys have proved as unreliable in the past as economic forecasts. There are indeed reasons to be optimistic, but a strong dose of caution is needed.

As published in City AM Wednesday 21st April 2021
Image: Roberto Lee Cortes via Pixabay
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