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10/05/2021

Surprise fall in UK unemployment numbers under furlough scheme

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Economists polled by Reuters had expected the unemployment levels would increase to 5.1% from 5.0% in the December to February period. The small increase was expected due to the government’s huge jobs subsidies measures. However figures show the unemployment numbers fell for the second month in a row to 4.9% in this period despite the country being in lockdown.

The Office for National Statistics (ONS) stated the fall was due to a large volume of men leaving the jobs market so the inactivity rate rose by 0.2% contributing to this decrease in unemployment.

However figures from HMRC reported a decline of 56,000 employees on company payrolls between February and March, the first decline in four months.

This meant that the total number of jobs lost is 813,000 since the start of the Covid 19 pandemic of which more than 50% is comprised of people aged under 25 as hospitality was hit hard, the ONS said.

During the Coronavirus pandemic in 2020 Britain’s economy shrank by nearly 10% which was a larger decrease than almost all other European Countries due to the lockdown being implemented later and then longer than other countries.

However due to the fast rollout of COVID-19 vaccinations the UK is lifting its third lockdown while other European countries are tightening their lockdown restrictions.

According to the ONS in March there was a significant rise in job vacancies particularly in the hospitality sector as restaurants reopened for outdoor business.

In March the finance minister Rishi Sunak announced the extension of the furlough scheme until the end of September with employers having to start to contribute towards the scheme from July. Currently the furlough scheme pays the wages of about one in five employees. Without this support UK budget forecasters said that the unemployment rate could have hit 10%.

Suren Thiru, head of economics at the British Chambers of Commerce, said Action will be needed to support the labour market when the furlough scheme ends. This will include supporting businesses to recruit and retain staff through a temporary cut in employer national insurance contributions.

Source: Reuters

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