The jobs crisis in London is gathering pace – and it will need a London response

The jobs crisis in London is gathering pace – and it will need a London response

Guest blog by Tony Wilson, Institute for Employment Studies (IES)

Photo by John.T

The public health crisis over the last four months is now fast becoming a jobs crisis.  Nationwide, the latest official figures show that there were already a million fewer people in paid work in June than in March, while the number of young people out of work is the highest that it has been since 2015.  And this is even before the waves of redundancies hit us that have been announced in the last few weeks.  London, like all other parts of the country, has been hard hit – but our new analysis for Central London Forward shows that the labour market crisis actually gathered pace through April and May, and that Central London is now seeing worse impacts that many other parts of the country.

The best measure of the economic impact on London residents is the ‘claimant count’.  This is a measure of all of those who make claims for benefit and are treated in the benefits system as being unemployed – so required to be available and looking for work.  The measure isn’t perfect for a number of reasons, most notably that around one in seven claimants are in work but with very low incomes (below £80 a week for single claimants, or £125 a week for couple households).  However, it is timely, gives detailed local data, and the large majority of claimants are from households with no income from work.

In the first month of the crisis, Central London boroughs saw a large increase in the number of people on the claimant count – rising by 60% in a single month.  Nonetheless this was slightly below the national average, which was for the claimant count to rise by two thirds (67%).  However, in May the claimant count in Central London rose by a half again (46%), while for the country as a whole it rose by around a quarter (27%).  So, in two months alone, the number of claimant unemployed in Central London more than doubled – rising from 71 thousand to 164 thousand.  Indeed the situation in London has continued to get worse, with claimant unemployment rising again in the month to June while in every other English region it fell slightly (as the new ‘Self Employed Income Support Scheme’ started paying out to people who had previously been claiming benefits).

Within the boroughs, Haringey appears to have been particularly hard hit – with one in ten residents now on the claimant count.  But all boroughs have seen large rises, and in Lewisham, Hackney, Lambeth, Tower Hamlets and Southwark the claimant rate has increased from below 4% before the crisis to 8% or higher now.

These large increases are of course driven by the effects of the ‘lockdown’ since March.  Within Central London, around one in six businesses had paused trading by late April, while over half (57%) had reported reductions in turnover.  In all, around 350 thousand Central London residents have been ‘furloughed’, with nearly twice as many Central London workers having been so (reflecting that many of those who work in Central London live elsewhere).  These figures are actually slightly better than for the country as a whole – reflecting that somewhat more people in Central London work in jobs that could be done remotely, while of course many others are key workers in health and care.  This then explains the slightly lower levels of out-of-work benefit claimants early on.

However as time has passed, it seems that London has been particularly exposed by the growing impacts of people staying away from the centre of the city – with knock-on consequences for large swathes of hospitality, food, retail, the arts, transport and more.  And with many of the people who work in these industries being self-employed or in the ‘gig’ economy, this has led to larger rises in Universal Credit and the claimant count than we have seen in other places.

Of course, as the economy now starts to reopen, many of those who have been temporarily laid off or seen their incomes fall are getting back to work.  However, we know that things aren’t going back to normal – with people spending less than before, pubs and restaurants half empty, theatres and concert halls still closed, and most of those who can work from home continuing to do so.  As a result, we’re not yet seeing any significant bounce back in hiring – with vacancies in London still three-fifths below where they were before the crisis began.  As a consequence, London has gone from having more vacancies than claimants before the crisis began, to on average more than five claimants chasing every new job opening in June.

It is to be expected that as we navigate our way through this crisis, demand will start to recover and recruitment pick up.  However even if the economy rebounds quickly in the autumn, it will likely take us years to repair the damage to jobs and businesses over the last few months.  The government’s Plan for Jobs, announced on 8 July, made a start on this – with welcome measures to subsidise employment for long-term unemployed young people (through the Kickstart scheme), a large expansion of employment services, and significant additional investment in programmes to support those out of work.

However, these measures will not be enough on their own.  Our analysis has shown that Central London has been particularly hard hit by this crisis, and so our response must meet the specific needs of Londoners and the London economy.  This means in particular how we continue to work to safely reopen London offices and the visitor economy; ensure that there is accessible and affordable transport and childcare so that people can get around, get back to work and take up new jobs; and protect and support those who have been worst affected by the crisis.