U.K. Job Cuts Jump Most on Record With More Pain on the Way
U.K. job cuts jumped the most on record in the three months through August even as lockdown eased.
(Bloomberg) -- U.K. job cuts jumped the most on record in the three months through August even as lockdown eased, raising concern that the worst is yet to come.
The number of redundancies climbed 114,000 in the June-August period, the most since 1995, the Office for National Statistics said Tuesday. That left the total at 227,000, a rate of more than 8 per 1,000 employees.
Meanwhile, employment fell by 153,000, almost five times the level estimated by economists, and the jobless rate rose to 4.5%, the highest since 2017.
The figures follow data last week showing the nation’s economic recovery slowed dramatically in August. With more curbs now in place to limit the spread of the virus, the fear is the winter will see more economic turmoil and a painful spike in joblessness.
Combined with the prospect of a no-deal departure from the European Union’s single market at the end of the year, pressure is mounting on the government and the Bank of England to do more to support the economy. Economists expect the BOE to expand its bond-buying program as soon as November.
Employers hit by the pandemic will see wage subsidies for furloughed workers end this month. Few think its replacement or other newly announced support for firms affected by local lockdowns will be enough to avert mass job losses, with some predicting unemployment could surpass 3 million – levels not seen since the 1980s.
What Our Economists Say:
“Cracks in the U.K.’s labor market widened in August. But the big test will come at the end of this month when the furlough scheme ends. The government decision to introduce less generous, more targeted support in the face of tightening restrictions and a rising caseload creates further downside risks, in our view. We expect unemployment to spike sharply in 4Q and see the Bank of England easing policy next month.”
--Dan Hanson, Bloomberg Economics. Click here for full REACT
Tuesday’s figures may have been impacted by revisions due to data-collection problems caused by the need to avoid close contact.
Unemployment stood at 1.52 million in the period through August after a 138,000-surge from the previous quarter, the biggest jump since the financial crisis.
Despite a small improvement last month, the number of employees on payrolls in September was still down 673,000 from March, data based on tax records show.
Chancellor of the Exchequer Rishi Sunak’s efforts to keep Britons in work come too late for many people. Firms from brewer Greene King to bank TSB have announced thousands of cuts in recent weeks.
“What we’re seeing today is the effect of the tapering of the furlough scheme,” Josie Dent, an economist at the Centre for Economics and Business Research, said in a Bloomberg Television interview. “August was the first month where employers had to contribute significantly and that will have meant, unfortunately for many, those costs just rose too high.”
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