New Labour Force Survey Data Reveals Full Effect of Pandemic to Date

Briefing paper

The Office for National Statistics released its latest Labour Force Survey data. Not normally a hugely anticipated event, but these are not normal times of course. This release has been anticipated by economic and labour market analysts across the country. It provides the first full picture of the labour market effects of the Covid-19 pandemic over its complete span to date, from March to September.

Firstly, analysis of job numbers by sector, shows the impact of the pandemic has been as sobering as expected. The Accommodation and Food sector has been hardest hit with a loss of 240,000 jobs, while there have also been substantial losses in Construction, Retail and Other Services. Also, the loss of over 200,000 manufacturing jobs is reflective of the wide range of manufacturing sub sectors. Some of these are known to have been hit exceptionally hard, such as aircraft, vehicle and engine manufacturing, even if others like food, medical and pharmaceutical manufacturing may have been less affected.

Some sectors are shown to have grown as a result of the pandemic, with Financial Services, Public Administration and Professional Services seeing increases in employment. These have not been enough to offset the losses however. The NET losses amount to over 430,000 jobs, as shown in the ‘NET CHANGE’ bar on the right of the waterfall chart at Figure 1. Total losses amount to a startling 803,000 jobs.

Figure 1: ONS Labour Force Survey Data: Difference between Jan-March survey and July to September Survey

These changes demonstrate an unprecedented shake-up and realignment of the labour market. To further understand these developments, our Economics team have used ONS data to assess their impact in GVA terms. The ONS provides an estimate of the total value of goods and services produced by each sector. It is then possible to calculate GVA per employee in each sector, and to measure the GVA impact of job gains and losses, as distinct from simple job numbers.

The results are extremely surprising, and contrast hugely with the employment impact. Firstly, the chart at Figure 2 shows a substantial rearrangement of the worst affected sectors in GVA terms. Manufacturing is hardest hit, with a GVA loss of £15bn, while the Accommodation and Food sector is now the third hardest hit after Construction, with a loss of around £5bn. Well over half of the total losses are attributable to the Manufacturing and Construction sectors alone. This contrasts with over 50,000 job losses across six sectors and over 100,000 across four sectors.

In terms of the sectors that have gained during the pandemic, Financial Services remains the biggest gainer in both job numbers and value (almost £16bn), while the Real Estate sector goes from 5th biggest gainer in job numbers to 2nd in value at almost £10bn.

Figure 2: Pegasus Group Analysis: GVA Effect of Covid-19 Labour Market Changes

What is most surprising of all however, is the net position. As is clearly shown, the chart is more or less balanced between losses and gains, with a small net GAIN in value of half a billion pounds. It is hard to imagine that the net results of the pandemic to date has been a gain in the GVA value of the labour market. This hides the exceptional degree of employment disruption that is evident in Figure 1.

What does this mean?

These changes amount to a transfer of wealth from lower value sectors to higher value sectors. The implications of this realignment are considerable, however temporary or long lasting they may be. The pandemic is set to create a brutal acceleration of inequality as large numbers of low wage jobs are lost while many high value jobs are retained. The analysis gives a clue as to why the housing market has surprised to date, with prices not only proving resilient but increasing in many areas. What appears likely is that homeowners, especially those working in the blue high value sectors in the chart, have been largely unaffected financially. Meanwhile, the cost of moving home has been reduced by interest rate cuts, and government support and subsidies to the housing market.

The implications for the so-called “Levelling Up” agenda could be profound. The acceleration of inequality will inevitably widen the north-south divide and add to the need for government intervention and investment in the more deprived areas of the country. These have also shown to be more susceptible to Covid-19. We have analysed area this in more detail in this article – Why are COVID case rates higher in some areas than others? Analysis of deprivation and density data.

Implications for planning

The boost to house prices will be temporary once support is withdrawn and particularly if job losses continue. Yet any level of economic recovery should mean that the housing market survives relatively unscathed. However, the problem of affordability and accessibility will become even more acute and calls for action likely to grow louder. The government’s preferred response has been demand side schemes like Help2Buy. On the supply side, the pressure to deliver new housing could provide added impetus to the quest to deliver 300,000 homes a year, as set out in the recent Planning White Paper.

Developers will want to think carefully about which sectors provide the best or most secure opportunities at this time, and this analysis gives some clues as to where these may be. It seems likely that hospitality and leisure may present medium to long term opportunities.

Authorities will be under greater pressure to better address issues of social value in their plans and in developments in their areas. This will likely mean added demand for affordable housing as well as renewed focus on development requirements like Health Impact Assessments. This is because HIAs can assess the cumulative impacts and benefits of developments on key areas of social value such as open space, air quality, health services, walking and cycling infrastructure, and so on.

For more information about the things discussed in this article, please contact a member of our Economics team: