Unlike in a typical recession, job losses are likely to be concentrated in a few sectors where the constraints of social distancing are greatest. They are also most likely to hit lower-paid workers, particularly the young. That brings its own problems, but it should at least reduce the impact on the rest of the economy. The fairly well-targeted measures in the Chancellor’s summer economic update should help the most vulnerable too.
Above all, the UK’s relatively flexible labour market is usually good at creating jobs to replace any that are lost. This contrasts with the eurozone, where the unemployment rate was already more than 7pc before the pandemic struck.
The turmoil in retail illustrates this well. Thousands of job losses have been announced recently. However, despite hundreds of thousands of redundancies in this sector over the last few years, the UK as a whole began 2020 at close to full employment. Even in retail itself, sales have already recovered to within a whisker of their pre-crisis levels, and many online and out-of-town stores are recruiting.
This all suggests that unemployment should fall sharply again as the economy adapts to the “new normal”, whatever that may be. The fundamentals remain in good shape and, even without the CJRS, there is a huge amount of policy stimulus in place. The recovery should therefore still look as much like a “V” as the gradual lifting of the lockdown allows, despite a painful bump in unemployment in the meantime.
Julian Jessop is an independent economist. He tweets @julianhjessop. Jeremy Warner is currently away.