
Centre for Cities tracks the latest unemployment claim statistics across the UK's cities and largest towns.
Three years since the Covid pandemic started, the labour market has stabilised, with employment above pre-pandemic levels for most places.
The Covid-19 pandemic disrupted labour markets across the globe, from people suddenly working from home to local services being temporarily closed. Part of this shock saw unemployment benefits claimant counts rise across the UK and employment rates fall. But how have UK labour markets fared in the three years since?
After a steep increase in claimant count in spring 2020, followed by sustained elevated levels for a year, claimant counts across the UK began falling steadily in spring 2021, as Figure 1 shows. This gradual decline continued even after government’s furlough scheme ended on September 30, 2021. But now, 3 years from the start of the pandemic, the national claimant count rate hovers around 3.6 per cent of the working age population – 0.6 percentage points above the rate in March 2020.
Source: ONS via Nomis.
There is a geography to the recovery of claimant count to pre-pandemic levels, as Figure 2 shows. Economically stronger cities like London and Brighton have not fully recovered, while in economically weaker cities like Sunderland and Middlesbrough, claimant count rates have been below pre-pandemic levels since the spring of 2022. This is the legacy of Covid’s uneven impact on places – stronger city centre high streets were hardest hit by the pandemic. Still, the pandemic has not drastically changed the geography of labour market strength in the UK – cities with the lowest claimant count rate are still in the Greater South East.
Source: ONS via Nomis.
The legacy of the Covid shock is still visible in the airport cities of Luton, Slough, and Crawley but they are much closer to pre-pandemic levels now than they were at their height – 5 percentage points above their March 2020 claimant count shares.
According to Pay As You Earn (PAYE) data, almost every city has more workers on its payroll now than before the pandemic. The exception is Swindon, whose industrial structure explains its lagging employment. Crawley’s employment bounce back is particularly a good sign – since it was the hardest hit during the pandemic – even if its claimant count is still above pre-pandemic levels.
However, not all data show an employment recovery. Data from the Labour Force Survey (LFS) – the ONS quarterly household survey on employment and economic activity – indicate that the total size of the UK workforce is smaller than before Covid. PAYE data does not include self-employed persons, so the increase in employment in this data likely reflects a compositional change from self-employed to pay-rolled employees during the pandemic. The LFS includes self-employed persons, which may explain the discrepancy between the two sources. Yet even if employment is still below pre-pandemic levels, the LFS shows it is slowly increasing, and economic inactivity is gradually declining. This suggests that the labour market is still marching towards recovery.
It was unclear at the beginning of the pandemic how long it would take for the labour market to stabilise. But now, three years from the onset, claimant counts and employment rates are close to or better than pre-pandemic levels. The impact of the pandemic, on labour markets at least, has been less than initially expected – both in terms of the depth of the shock but also the time it has taken to recover. The UK avoided a predicted unemployment crisis in part thanks to government intervention. The recovery has continued even after the removal of the furlough support scheme in autumn 2021, although some cities still have a way to go. But even behind these employment figures is an army of people not in work or seeking work. The next obstacle for government is to grow the labour market and the economy overall, part of which will include addressing the UK’s economic inactivity problem.
Centre for Cities tracks the latest unemployment claim statistics across the UK's cities and largest towns.
As well as providing a deep dive into the latest economic data on the UK’s cities and largest towns, this year our flagship publication focuses on the scale and geography of economic inactivity across the country.
Our analysis shows that the city centres that were the strongest performers pre-pandemic were hardest hit by Covid-19
More than a year since the Covid furlough scheme ended, most urban areas appear to have bounced back to pre-pandemic employment levels – with just a couple of exceptions.
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