UK job market reeling in wake of coronavirus pandemic
Unemployment growth has plummeted as the number of job vacancies decrease with the UK facing the consequences of the Covid-19 outbreak.
Overall growth in the number of people on company payrolls has decreased to 0.8% in March, down from 1.1% in February, according to a preliminary tax report that was released early.
Government budget forecasters predict that unemployment could reach as high as 10% with a potential two million more people losing their jobs over a three-month lockdown.
David Freeman, a labour market statistician for the Office of National Statistics, said: “Our final data wholly from before the coronavirus restrictions were in place showed the labour market was very robust in the three months leading to February.
“For the first time, we have brought forward information on the number of employees in work using PAYE data to cover a more recent period.
“These experimental statistics show a softening picture for March but cover the month as a whole including the period before the coronavirus restrictions were in place.”
The ONS further revealed the overall number of vacancies plummeted by 52,000 to a total of 795,000 for the quarter and also stated that earnings growth slowed to 2.8% in February, down from 3.1% in January.
Yael Selfin, chief economist at KPMG UK, said: “Early figures for March underscore the impact Covid-19 is likely to have on the labour market.
“An additional spike in unemployment after the lockdown also seems likely, once government support via the Job Retention Scheme ends.
“While the unemployment rate in 2020 could average below the rate the UK suffered in the recessions of 1980s, 1990s and 2008-09, this is due to the historically low level of unemployment in the UK before the current crisis.
“The rise in unemployment is expected to be proportionally larger than in past recessions owing to the severity of the crisis.”
Paul Dales, chief UK economist at Capital Economics, predicts unemployment will peak at 9%.
He said: “The small crack evident in the latest batch of labour market data may soon turn into a chasm.”
The ONS has also reported a 12,100 monthly increase in claimants for unemployment benefits, far below the numbers forecast by economists. However, this data is based on information that predates the Covid-19 lockdown, as much of the economy was put on hold on March 23.
Furthermore, government grants are helping many companies get through the lockdown, allowing many businesses to close down to help contain the virus. The furloughs imposed often mean these companies pay their staff 80% of their total wages, with many offering such benefits until the end of June in a bid to stem the rise of unemployment.
Chancellor Rishi Sunak said on Monday that more than 140,000 companies applied for this scheme, totalling about a million workers within eight hours of the initiative’s announcement.
However, there is a worry that this initiative is not helping reassure Britons of job security in the face of the crisis as the unemployment rates over the next three months are expected to increase.
Data released on Tuesday shows the unemployment rate over the last quarter increased slightly to 4% up from 3.9%, which the ONS linked to fewer entrants into the labour market.
Despite this, the proportion of the workforce in jobs is sitting at 76.6%, a new record high as the country saw a 352,000 jump in employment numbers in the quarter leading to February. This totals an employment increase of 172,000 compared to the previous quarter, way ahead of the increase of 100,000 predicted by Pantheon Macroeconomics.
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