Monthly economic brief: June 2021

Labour Market

There are signs of improved recruitment activity as lockdown restrictions start to ease.

Coronavirus Jobs Retention Scheme (CJRS)^[8]

• The CJRS has been supporting the retention of jobs and incomes since March 2020 and is currently set to remain in place until the end of September 2021.
• The number of jobs supported by the furlough scheme rose to 393,100 in January during the recent lockdown, though has gradually fallen as restrictions have eased and businesses have resumed trading and started to increase capacity.

• At the end of April, 269,800 employments (11%) in Scotland were furloughed, down 98,600 (27%) since the end of February. This remains higher than the low of 195,200 (8%) furloughed jobs at the end of October 2020, however more recent business survey data indicates that the proportion of staff on furlough continued to fall into the first half of June.^[9]
• The accommodation and food services sector (77,000) and the wholesale and retail sector (47,300) continue to have the highest number of employments on furlough, followed by the arts, entertainment and recreation sector (19,900) at the end of April. However, they have also had the largest falls over the month as restrictions on the consumer facing services sector have eased (down 10,490, 16,300, and 8,270 respectievly).

Official labour market statistics

• The latest labour market statistics for February – April 2021 show Scotland's employment rate was 74.2% (up 0.3 percentage points over the year),^[10] the unemployment rate was 4.2% (down 0.5 percentage points of the year) and the inactivity rate was 22.6% (up 0.1 percentage points over the year).
• The headline labour market indicators continue to compare well against historical trends, however only show a partial picture of the labour market as people on furlough are considered employed. Wider labour market indicators provide further insight into the challenges that have emerged in the labour market during the pandemic, however there are signs of improvement in recent months.

PAYE payrolled employment and Claimant Count

• The more timely Pay As You Earn (PAYE) Real Time Information data show that the number of payrolled employees in Scotland (2.35 million) increased by 13,041 (0.6%) over the month and has increased by 39,522 (1.7%) from its recent low in November.
• Despite recent progress, the number of payrolled employees in Scotland remains 50,350 (2.1%) lower (UK: -1.9%) than its pre-pandemic level in February 2020.^[11]

• Similarly, Scotland's Claimant Count (the number of claimants of Job Seekers Allowance and claimants of Universal Credit claiming principally for the reason of being unemployed) fell 3.7% in May to 197,500; a claimant count rate of 6.2%. This continues its recent downward trend, having fallen 11% from its peak in August 2020. However, the claimant count remains 83,800 (74%) higher than its pre-pandemic level in February 2020, signalling (alongside the payroll data) that the number of people that are unemployed or employed with low income and/or low hours has increased significantly during the pandemic.^[12]

Demand for staff

• Business survey data has also reported an increase in demand for staff and recruitment activity in recent months as restrictions have eased and firms have prepared to resume further trading activity.
• In May, demand for both temporary and permanent staff in Scotland continued to strengthen and was broad based across sectors.^[13]
• This corresponds with UK vacancy data for March to May 2021 which showed UK job vacancies grow 24% over the quarter and recover to 27,000 (-3.4%) below their pre-pandemic level in Q1 2020.

• At a sector level, growth in vacancies over the quarter was broad based, but notably sharper in accommodation and food services (up 260%) as firms in the sector sought to recruit staff as restrictions eased. The ONS reported that there was some evidence to suggest that vacancies in the sector had been created by workers not returning to their previous jobs as the sector reopened.^[14]

Earnings

• Mean PAYE monthly pay fell sharply at the start of the pandemic, however strengthened over the course of 2020 and rebounded back above its pre-pandemic level in July. Relatively robust growth over this period in part reflects lower inflows of employees over this period (at a UK level mean pay tends to be around 40% lower than for those continuously employed).^[15]
• Following a slight fall at the start of 2021, latest data for April suggests pay growth in Scotland has returned to positive, growing 0.4% and 2.1% over March and April to £2,264. On an annual basis earnings growth strengthened to 9.8%, however that in part reflects the sharp fall in mean earnings at the start of the pandemic.

• More broadly, while mean earnings have rebounded, the picture is complex and caution needs to be used in interpreting the figures, particularly in light of the fall in the number of payrolled employees. There are compositional effects (e.g. by sector and across income levels) underlying the data which suggest that not all parts of the labour market have experienced the same rebound as the mean rate implies.