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The new normal

While final lockdown restrictions in England were lifted on Monday, seeing people return to nightclubs mask-free, the ‘pingdemic’ has become a major problem for the UK. Industries are suffering from mass staff-shortages as self-isolation notifications hit record highs.

Newsletter from 23 July 2021

In England, the week started with the arrival of the long-anticipated (by some) ‘Freedom Day’. Masks and social distancing became optional – although still encouraged – and nightlife was revived, with clubs reopening for the first time since March 2020. People enjoyed their new freedom amid a scorching heatwave, with temperatures hitting 33 degrees in some parts of the country. In all the warmth and revelry, at a glance, life appears to be on its way back to ‘normal’.

But there are still many challenges ahead. Boris Johnson faced public backlash in response to the new policy that will require proof of double vaccination to enter certain venues from the end of September. The prime minister also came under fire from former advisor Dominic Cummings, who spoke to the BBC about the handling of the pandemic.

To make matters worse, the ever-growing ‘pingdemic’ saw the NHS app tell a record 619,000 people to self-isolate this week, with a third of a million people testing positive. Self-isolation rules are also causing major headaches for many different industries. Bin collections have been postponed, restaurants have had to close and supermarkets have struggled to find enough staff to stock the shelves.

Further down the supply chain, some meat production lines may have to shut temporarily, with several factories reporting that 10% of staff have been told to stay at home. Similarly, the UK’s biggest car factory reported that over 20% of its staff must self-isolate.

This is a huge problem for sectors where employees cannot work from home. Although double-vaccinated people will be exempt from isolation notifications from 16 August, several businesses are demanding that this date be brought forward to help ease current pressures.

A hybrid future?

With Covid cases continuing to climb, how do the people that can work remotely feel about returning to the office full-time? In a new piece this week, Larissa Marioni (NIESR) reports that the majority of people want a mix of home working and time in the office.

A survey from the Office for National Statistics (ONS) shows that people working from home enjoy a greater work-life balance, fewer distractions, and improved wellbeing. That being said, younger workers, usually earlier on in their careers, reported that remote working made it harder to collaborate with colleagues, and that there were more distractions.

While it is up to businesses to decide how and where they want their staff to work, Larissa’s article suggests that hybrid working is likely to become the norm. For many, working from home has improved wellbeing by providing a better work-life balance as well as less time commuting. But in other cases this is counterbalanced by the lack of socialising and the onset of ‘zoom fatigue’ – where people struggle to focus on video calls. Changes in work patterns could have wider effects on the UK economy, from where firms are located to where people choose to live. This may have numerous policy implications for urban planning, housing markets and wider infrastructure projects.

Unravelling the payroll data

Aside from changes in how and where people work, the pandemic has also affected employment levels. As measures ease, has the number of people in work recovered and, if so, has this affected the structure of the UK labour market?

This week, Kate Lucas (University of Bristol) discussed the implications of the latest payroll data from the ONS for the UK’s levelling up agenda. The data suggest that differences in employment across UK regions reversed during Covid-19, with London falling behind the rest of the UK. The numbers of employees in the North East, North West, East Midlands and Northern Ireland have risen to above pre-pandemic levels, but employment in London is still 3.2% below where it was in February 2020 (see Figure 1).

Figure 1: Payrolled employees, percentage change since February 2020, June 2021

Source: ONS

London has historically driven the UK’s employment growth. The poor performance seen in the latest data could reflect the uneven impact of travel restrictions on jobs and workers in the capital. The tourism industry has been unable to operate at full capacity since international travel restrictions were put in place in March 2020, andthe number of employees in this sector  has fallen by almost one-quarter as a result. This disproportionately affects London, with the city accounting for 54% of the UK’s inbound spending.

But as Kate highlights, one of the main limitation of the payroll dataset is that it fails to include self-employed workers. To account for this, it is useful to look at the ONS Labour Force Survey (LFS) – a more conventional way of measuring labour market activity. This allows households to provide their employment status – including whether they are self-employed. The LFS data (as of May 2021) suggest employment in every region has fallen. The headline of employment recovery in some regions found in the payroll data may therefore be overly optimistic.

Looking forward, the UK will face new labour market challenges when the government’s furlough and self-employment schemes come to an end in September. It will also be interesting to see how effective the new ‘Kickstart’ and ‘Restart’ programmes will be. Whether these schemes can prevent an unemployment crisis is yet to be seen.

Inconsistency and regional variation within the labour market data, together with the high-profile disruption of the ‘pingdemic’, suggest that things are far from being ‘back to normal’. But whether this uncertainty is also something people will have to ‘learn to live with’, or if a more stable recovery lies ahead, depends on how policy-makers react to the latest challenges.

Observatory News

  • Instagram (@economicsobservatory). We relaunched our Instagram page this week, posting new infographics, quizzes and article summaries. Please follow us and stay tuned for our competition announcement and other news.
  • Tickets for our Talking Economics event on 17-19 November are still available. Find out more and sign up here.
Author: Max Wood
Photo by anna-m. w. from Pexels
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