Almost 10 million new jobs will need to be generated to recover from the pandemic, making job creation the most pressing policy challenge we face in the immediate future.
The Covid-19 pandemic was a massive shock for the UK labour market. Between March 2020 and January 2021, 1.3 million people lost their jobs and 4.7 million more workers were put on furlough. That means that around one in five UK workers’ jobs were directly affected by the crisis, making job creation the most pressing policy challenge in the immediate recovery period. But while every part of the United Kingdom is affected and needs to create jobs, cities and large towns will play a particularly important role in this recovery.
This is because the centres of cities and large towns are the unemployment hotspots of the pandemic. Despite being home to 55 per cent of the population, 65 per cent of all new unemployment-related benefit claimants in the UK between March 2020 and January 2021 occurred in cities. This disproportionate impact can be explained by a variety of different factors such as cities having higher shares of specialist amenities that had to shut down, such as performing arts venues or restaurants; cities’ role as hubs of leisure and culture have left them exposed to this economic shock. Given this clustering of unemployment in cities, the economic recovery will also need to be led by them.
Figure 1: Population and new unemployment benefit related claims
Source: ONS Population estimates, ONS claimant count March 2020 and February 2020
The good news on this is that Centre for Cities’ latest research in partnership with HSBC UK shows that cities and large towns have a good recent track record in creating jobs. Covid-19 ended a seven-year jobs miracle, during which the UK saw growth of 2.7 million private sector jobs.
Cities and large towns created 64 per cent of all new jobs created in the UK in that period. This was led by Britain’s ten largest cities, which accounted for almost half (45.6 per cent) of the jobs created. In contrast, non-urban areas created only 36 per cent of new jobs.
Figure 2: Contribution of cities and non-urban areas to job creation, 2013-19
Source: ONS, Business Structure Database (BSD)
Looking at the country as a whole, a net increase of 2.7 million jobs was actually the result of 19.3 million private sector jobs being created during this period, and 16.6 million being lost. To put it another way, around seven new private sector jobs were needed to create one viable job. In the race to create jobs, cities were slightly faster as they “only” needed 6.8 private sector jobs to create one lasting job. Non-urban areas, however, needed to create 7.5 private sector jobs for the same outcome.
To illustrate this, Figure 3 shows how many jobs cities created and how many they lost overall between 2013 and 2019. Taking London as an example, to achieve a net increase of 790,000 jobs, the capital created 4.6 million jobs while 3.8 million jobs were lost.
Figure 3: Private job gain and loss of in British Cities, 2013-19
Source: ONS, Business Structure Database (BSD), ONS, Annual Survey of Hours and Earnings (ASHE), average gross weekly workplace-based earnings. Own calculations for PUA-level weighted by number of jobs, CPI inflation adjusted.
These numbers illustrate that the challenges the country is facing in the recovery period run much deeper than creating just 1.3 million jobs. If this pattern of high job churn repeats post-Covid, then 9.4 million new private sector jobs will be needed to get the 1.3 million people who lost their jobs during the pandemic back into work.
While there is hope the economy will bounce back quickly, there are a number of things that policy can do to help get the job creation engines firing again. The first is helping high street businesses and the hospitality sector find their feet again. These sectors played a central role in the ‘jobs miracle’, and will be needed again post Covid-19. The Government should introduce a ‘Spend Out to Help Out’ voucher if consumer demand does not return post-lockdown.
In addition, there should be direct support for jobs-heavy industries, particularly where they contribute to other government ambitions. One such example is construction (which also played an important role in creating jobs across the country) an expansion of the Green Homes Grant to improve energy efficiency would create jobs and help the UK meet its net zero goals, and has a part to play in the Government’s green agenda.
A fuller analysis and list of policy recommendations are set out in Centre for Cities’ new report Building Back Better: How to recover from Covid-19.
This work was produced using statistical data from ONS. The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation or analysis of the statistical data.
This work uses research datasets which may not exactly reproduce National Statistics aggregates.
Leave a comment
“While there is hope the economy will bounce back quickly, there are a number of things that policy can do to help get the job creation engines firing again.” Clearly the pandemic has interfered with the first introduction of this with the helpful/unhelpful attitudes. Should central Government be the driving force: or instead local Government be the driving force, and hence funded locally for, e.g. Eat Out to Help Out?