What can previous recessions tell us about the Covid-19 downturn?
The labour market effects of the Covid-19 crisis measured as of June 2020 are compared with the three most recent UK recessions: the early 1980s, the early 1990s, and the downturn induced by the global financial crisis in the 2000s. We design a ‘realistic’ employment rate measure (based on individuals working a positive number of hours) that shows a decrease in employment between February and June of more than 15 percentage points, in sharp contrast with stable official unemployment. With hours worked only at 80 percent of the level from February 2020, the picture is bleak - the UK economy is on track to suffer its biggest unemployment shock since at least the 1980s recession. Despite their different impacts across industries, the Covid-19 crisis and the three most recent UK recessions share the common feature of a disproportionate impact on the most vulnerable (the poorest, the youngest, the least educated, and ethnic minorities).
17 August 2020 Paper Number CEPCOVID-19-007