By Richard Dorsett and Jessica Hug
In our new Discussion Paper published today we provide new evidence on how local labour markets in the U.K. have reacted to the disruption brought by the coronavirus (COVID-19) pandemic. Combining monthly alternative claimant count data (on the number of people claiming unemployment related benefits) with Adzuna vacancy information, we are able to show geographic variations in labour market tightness (the number of vacancies for each unemployed person). This is available at the level of the local authority district (LAD) and the chart below summarises changes since 2018 at the regional level.
We aggregate the available LAD-level data to approximate travel-to-work areas since these fit more naturally the idea of a local labour market. The chart below shows how the relationship between unemployment and vacancies has changed year-on-year within these aggregated areas. There is relative stability across 2018 and 2019, a marked slackening 2019 and 2020 and bounce back in 2021.
We estimate the matching model that underpins this relationship in the pre-pandemic period, using a specification that allows for local labour markets to vary in their efficiency; that is, in their ability to move unemployed people into work. We then incorporate this measure of relative efficiency into a regression analysis of individual-level transitions between three possible states: employment, unemployment and economic inactivity. This uses April-June quarter Labour Force Survey (LFS) data which provides retrospective data on employment one year earlier, along with residential location at that time.
The estimation results show that male unemployment recovered more quickly from the effects of COVID in more efficient local labour markets. For females, on the other hand, there was no such relationship.
Read the full ESCoE Discussion Paper here.
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