U.K. Furloughed Jobs Plunge to Pandemic Low as Economy Opens
(Bloomberg) -- The number of jobs supported by the U.K. government furlough program fell to the lowest level since the start of the pandemic as the economy took a further step toward normality.
At the end of June, the number of people getting support from the Coronavirus Job Retention Scheme was 1.86 million, almost 600,000 fewer than a month earlier, the U.K. tax authority said Thursday. A survey-based estimate by the Office of National Statistics suggested the decline continued into July.
How quickly furloughed workers return to work is a key question that will determine the speed of the U.K.’s economic recovery this year and beyond. Bank of England policy makers are also closely watching the figures as they consider when to start withdrawing the monetary stimulus deployed to fight the coronavirus recession.
The decline is a boost for Prime Minister Boris Johnson’s government, which has spent almost 70 billion pounds ($98 billion) supporting nearly 12 million jobs at various times since the pandemic began in March last year. The latest data cover the weeks following the reopening of bars, restaurants and cinemas on May 17.
“It’s fantastic to see businesses across the U.K. open, employees returning to work and the numbers of furloughed jobs falling to their lowest levels since the scheme began,” Chancellor Rishi Sunak said in a statement. He noted that young people are no longer the biggest users of furlough as jobs in the hard-hit hospitality and retail sectors open up.
Separate figures from the ONS showed the proportion of the business workforce on furlough fell to 4.9% in early July. Given the margin for error, that suggests about 1 million to 1.5 million people were on wage support, the ONS said.
With the economy rebounding strongly, a concern is that people on government support are limiting the labor supply, making it harder for employers to fill vacancies. That risks fueling wage pressures and inflation.
At the same time, unemployment is almost certain to rise when the program finishes at the end of September. While some who remain furloughed will be re-employed or find jobs elsewhere, many are likely to find themselves out of work.
The jobless rate is expected to reach 5.2% by the end of the year, up from its current rate of 4.8%, according to economists surveyed by Bloomberg.
Under the plan, furloughed workers receive 80% of their pre-pandemic pay. The government’s contribution will be further cut in August to 60% of the total, with the rest topped up by employers.
The number of jobs still on furlough remains “a cause for concern” as the program is wound down, according to the Resolution Foundation.
“With employer contributions to furloughed staff doubling from this Sunday, and the scheme ending completely in just two months’ time, it’s vital that as many furloughed staff as possible return to work soon, in order to limit the rise in unemployment this Autumn,” said Charlie McCurdy, an economist at the London-based think tank.
The decline last month was split evenly between those on full furlough, where no work is being done, and those on partial furlough. The number fully furloughed jobs, which are more likely to be eliminated come September, fell below 1 million to stand at 971,200 at the end of June.
“How much more this drops leading up to September is now, in part, a question of how menacing the delta variant is and how this could impact the pace of growth in the economy,” said Dan Hanson of Bloomberg Economics. “I expect somewhat of a further drop in the number of furloughed jobs in July, but it might be a slow grind down thereafter and there remains a risk a considerable proportion will become unemployed.”
There was also good news for younger workers, who bore the brunt of last year’s recession. People age 25 to 34 saw the biggest fall in furlough numbers last month, and those under the age of 45 accounted for 60% of the total decline.
Furloughed men now outnumber furloughed women, reflecting the reopening of sectors such as accommodation and food services that have a high proportion of female employees. London showed higher levels of staff on furlough than the rest of the country.
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