More grim jobs data highlights the challenge facing Rishi Sunak

The chancellor said he didn’t want to give furloughed workers ‘false hope’ by extending his job retention scheme but it could be the that the economy is simply too weak to cope in its absence, writes James Moore

Sunak has been urged to extend the furlough scheme past October (Getty)

If two sets of data out this morning are right, the pressure on chancellor Rishi Sunak to perform a volte face and extend his job retention scheme, and prevent a bitter economic wind blowing through Britain in the autumn, is only going to mount.

The Chartered Institute of Personnel & Development’s regular quarterly survey of 2,000 employers has found that one in three (33 per cent) expect to cut jobs in the third quarter of 2020.

The figure is 50 per cent higher than the one that emerged in the spring edition of its Labour Market Outlook, which is put together in conjunction with Adecco Group.

It won’t surprise anyone to learn that more than twice as many private sector organisations (38 per cent) expect to make cutbacks as public sector employers (16 per cent).

The number looking to hire has picked up a bit, but it remains well below trend. The report also found that overall confidence in employment has fallen in all three sectors of the economy: private, public and voluntary.

Its net employment balance, measuring the difference between the proportion of employers who expect to increase staff levels and those who expect to cut, has fallen from minus four to minus eight over the last three months.

The business trends data produced by professional services firm is no less troubling. Its numbers, culled from the UK’s main business surveys, suggest that the economic recovery has started to plateau.

BDO’s Services Output index rose by 6.81 points to 71.54 in July as the economy continued to reopen. But its figure for manufacturing suggests that sector has started to put on the breaks. With overseas demand still limited, it rose by just 5.81 points in July compared to 10.92 points in June.

Its Employment Index also fell, and for the fifth consecutive month, sliding 0.66 points to its lowest level since November 2016.

“This relatively steady and small rate of decline suggests that government support has been broadly successful in retaining jobs so far,” said BDO. But that support is starting to taper off. If the CIPD survey is correct, the rate of decline will rapidly pick up in future datasets.

Kaley Crossthwaite, partner at BDO, fears the recovery will continue to slow as the necessity for social distancing puts a lid on the services sector, while manufacturers are dogged by weak demand.

Sunak said on Friday that extending the furlough scheme would provide “false hope”. He’s been backed by Andrew Bailey, the governor of the Bank of England.

But there’s a counter-argument that holds that the economy is simply too weak to cope with its withdrawal, which this data feeds into.

Were he to hold his nerve, and wait for UK plc to be in a stronger position, more of the furloughed jobs might be saved. The hope he so airily dismissed mightn’t be as false as he claimed.

The halo he currently wears certainly looks set to acquire a coating of tarnish, and the giddy talk of him as a future prime minister you’ve heard is likely to be silenced.

The bank last week said we haven’t suffered as bad of a downturn as some feared, although GDP still took a record kick, but it is rapidly becoming clear that the recovery is going to be a lot slower than people hoped. And the ever-present prospect of a second wave of the coronavirus remains in the air. It could very easily coincide with the expected rash of redundancy notices in the autumn.

Sunak clearly needs something better than his jobs retention bonus – which will hand employers £1,000 for every furloughed employee still on the payroll in January – to give the labour market a shot in the arm.

If the government’s magician in residence does have something up his sleeve, he could do with sharing it with us.