UK unemployment data: Five key facts as furlough stems job losses
New figures released today showed that the UK’s unemployment rate unexpectedly remained flat for the three months to April, confounding expectations of a sharp rise.
But economists are warning that a bleak picture lurks behind that headline figure as the impact of coronavirus on the British labour market begins to show. City PM has broken down the key takeaways from the latest Office for National Statistics (ONS) release.
Unemployment rate flat thanks to furlough scheme
All eyes were on the UK’s unemployment rate ahead of the publication of today’s data, which had been expected to increase sharply.
Economists polled by Reuters had mostly predicted that unemployment would rise to 4.7 per cent, but it instead remained flat at 3.9 per cent.
The government’s extensive coronavirus job retention scheme (CJRS) has been crucial to holding off a massive spike in unemployment since the Covid-19 pandemic hit the UK, with employers able to furlough staff they can no longer afford to pay rather than laying them off.
A quarter of workers in the UK – almost 9m – have been furloughed, according to the latest figures. This has helped keep the UK’s jobs data “in suspended animation”, as Pantheon Macroeconomics’ Samuel Tombs put it, with millions at risk of losing their jobs once the JRS support is tapered off from August and comes to an end in October.
Over 600,000 workers lose jobs
Andrew Sentance, a former Bank of England policymaker, suggested that the unemployment rate was masking the true state of the UK’s labour market, with other indicators telling a different story.
One crucial indicator is the ONS experimental payroll figures, based on tax data, which showed that the number of people on company payrolls fell 612,000 or 2.1 per cent between March and May.
That left the number of people on payrolls 1.7 per cent lower than in May 2019, the ONS said.
James Reed, chair of recruitment firm Reed, said the figures showed that “what was sadly a health emergency is now rapidly becoming an employment crisis”.
“Millions of jobs are now at risk and what we’re seeing may just be the tip of the iceberg. There’s a real danger that unemployment could go above 15 per cent, and as the clock continues to tick on the Government’s generous CJRS, jobseekers and businesses face an unforgiving employment landscape,” he added.
Vacancies plunge to record low
Another indicator that made for grim reading was the quarterly jobs vacancy figues, which plunged by the largest amount since the ONS began collecting the data in 2001.
In the three months to May, the number of vacancies slumped by 342,000 to 476,000.
The “wholesale, retail trade and repair of motor vehicles” and the “accommodation and food service activities” industrial sectors contributed most significantly to the fall, the ONS said. Both sectors have been hit hard by lockdown and social distancing measures.
“Despite the apparent stability of the actual unemployment rate, the labour market data were still pretty awful,” said Capital Economics’ Ruth Gregory.
And some of this will surely start to filter through into the actual unemployment figures as the government’s job furlough scheme is wound down from August,” she added.
Hours worked collapse during lockdown
The number of hours worked per week dropped by the biggest amount on record, falling 8.7 per cent to 959.9m in the three months to April from 1.041bn in the three months to March.
Year-on-year, the number of total actual weekly hours worked fell 8.9 per cent.
This reading is important because it shows the real impact of the actual working time lost due to the coronavirus crisis, giving a truer indication of how much of the UK labour market has stopped working during the pandemic.
Unsurprisingly, the “accommodation and food service activities” industrial sector recorded the biggest average fall in actual hours, which fell 6.9 hours to 21.2 hours per week.
Furlough scheme leads to slump in earnings growth
In the three months to April, total pay fell 0.4 per cent in real terms – the first quarterly drop since January 2018.
The ONS said average pay growth “slowed noticeably” in April, with pay declining most in industries where furloughing has occurred the most, such as accomodation and food services.
Single month growth in average weekly earnings for April 2020 was -0.9 per cent for total pay and flat for regular pay.
Tombs said the slump in earnings growth was a by-product of the CJRS, with the falls suggesting that “the majority of furloughed workers were only paid 80 per cent of their usual wages — the minimum stipulated by the scheme — and did not receive a top-up from their employers”.
“Average wages might well recover in the autumn, as furloughed staff get fired; low-paid part-timers have been furloughed more than most,” he said.