According to the new Office for National Statistics labour market survey, there are early indications that the UK economy has been adversely affected by the impact of the coronavirus (COVID-19) pandemic.
Labour Market Survey: Rate Of Increase In Pay Slows To 2.9%
The rate of increases in pay rises has slowed with average pay rises now at 2.9% for the period December 2019 to February 2020, compared with the equivalent quarter in 2019, according to the Office for National Statistics. This is down from 3.4% for the period December 2018 to February 2019, and down from 3.4% for the period September to November 2019. When bonuses are added in, the rate of increase for the 3 months to the end of February 2019 was 2.8%. Once adjusted for inflation, the real terms increase was 1.3% excluding bonuses, and 1.2% including bonuses. This is down from a recent peak for both of 2% in the 3 months to June 2019. However, the continued increase in living standards represents a turnaround from the squeeze on living standards that existed at the beginning of 2018, where the rate of increase in pay was barely matching the increase in inflation. Moreover, prior to that, there was actually a real terms decrease in pay, with inflation outstripping pay rises (e.g. in the 3 months to July 2017, pay in real terms both including and excluding bonuses fell by 0.4%).
Other Statistics From The Labour Market Survey
The Office for National Statistics found in their labour market survey that for the 3 months to February 2020:-
- Average pay rises have increased by 2.9% excluding bonuses, and by 2.8% including bonuses, compared with the equivalent period in 2018. This represents a fall since November 2019, when average pay rises increased by 3.2% including bonuses and by 3.4% excluding bonuses
- Adjusted for inflation, the real terms increase in average pay rises excluding bonuses was 1.3%, and 1.2% when including bonuses
- Unemployment stands at 1.36 million (4.0% of the workforce), an increase of 22,000 during the 3 months to February 2020. This represents the second consecutive quarterly increase in unemployment, mainly driven by the largest increase in unemployed men since the quarter to May 2012
- The number of people in work is 33.07 million, an increase of 352,000 during the 3 months to February 2020. 90% of that increase were women and the total of 33.07 million is a new record
- 8.37 million people are economically inactive (neither in or seeking work), a fall of 166,000 during the 3 months to February 2020.
Inflation Falls To 1.5%
UK Inflation fell to 1.5% in March 2020, down from 1.7% in February 2020, and down from a 6 month high of 1.8% in January 2020.Â
The main reason for the recent fall in inflation has been the falling demand for clothes as the impact of the coronavirus pandemic started to take hold, plus the fall in the oil price.
The Impact Of The Coronavirus (COVID-19) Pandemic
The Office for National Statistics (ONS) report in their latest labour market survey that the early indications are that the UK economy has been hit hard by the coronavirus (covid-19) pandemic. The report states that: "For the period 23 March 2020 to 5 April 2020,.....75% of the businesses that responded to the survey continued trading, while the remaining 25% had temporarily closed or paused trading. The firms that continued trading reported that 70% of the workforce was working as normal, but they had furloughed an average of 21% of the workforce. In addition, 5% of the workforce was off sick or in self-isolation because of COVID-19.......Of the businesses that continued trading, 41% reported having to reduce staff levels in the short term, while 29% reported having to decrease working hours. The responses indicate that uncertainty remains heightened and businesses are taking precautions to reduce their employment costs."Â
The following data from other sources outside of the ONS labour market survey, also highlight the damage that has been done to the UK economy by the coronavirus:-
- Google location data shows that retail footfall is down 85% over the last 2 months
- The EY Item Club predict that it will take 3 years for the UK economy to return to its pre-coronavirus pandemic levels, and predict that UK GDP could fall by around 6.8% in 2020, before rebounding with an increase of 4.5% in 2021
- The National Institute of Economic and Social Research (NIESR) predict that unemployment will reach 10.5% this year and that the economy will lose out to the tune of £800 billion over a 10 year period, a figure that could be exacerbated by up to a further 50% if there is a second peak in cases of the coronavirus. The NIESR predict that the UK economy will contract by around 7% as a whole in terms of GDP in 2020, with a second quarter fall in GDP of between 15% - 25%. The Office of Budget Responsibility are gloomier, predicting a second quarter fall of 35% of GDP, and by 13% for the whole of 2020
- Gertjan Vlieghe, a member of the Bank of England's interest-rate setting committee, has stated that: "Based on the early indicators, and based on the experience in other countries that were hit somewhat earlier than the UK, it seems that we are experiencing an economic contraction that is faster and deeper than anything we have seen in the past century, or possibly several centuries."
