U.K. Loses 700,000 Jobs to Pandemic as Aid Pressure Mounts
Britain’s labour market took a turn for the worse in July taking total job losses under the pandemic to almost 700,000.
(Bloomberg) -- Britain’s labor market took a turn for the worse in July even as the economy gradually reopened, taking total job losses under the pandemic to almost 700,000 and raising pressure on the government to extend its wage support.
Employment fell by 102,000, the first decline since the initial full month of lockdown in April, the Office for National Statistics said Tuesday. The pandemic also finally began filtering through to the unemployment rate -- so far subdued by the furlough program -- pushing the single-month figure up the most since 2013.
The figures are a stark signal of labor-market fragilities as the government prepares to end furloughs next month. Chancellor of the Exchequer Rishi Sunak has insisted that companies must adjust to the post-Covid reality, although economists fear a dramatic spike in U.K. unemployment. Many European nations have extended their programs.
”No matter what conclusions you draw from today’s data, the critical period is going to be October” when government aid expires, said Philip Shaw, chief economist at Investec Bank Plc.
Tuesday’s report showed some damage has already been done, even though the government’s plan has helped support almost 10 million jobs. The number of employees on payrolls in August was down 695,000 from March -- the equivalent of about 2.4% of workers -- while the number of people claiming jobless benefits has more than doubled to 2.7 million.
That’s left the government facing mounting calls to do more to safeguard jobs and wages after the worst economic contraction in centuries.
Most economists predict the heightened uncertainties will prompt the Bank of England to increase its monetary stimulus later this year.
Policy makers may lay the groundwork for that when they meet this week as the U.K. faces a triple whammy of a spike in unemployment, new restrictions on activity as infections mount, and a turbulent Brexit at the end of the year.
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“Significant dangers lie ahead. We expect the jobless rate to hit 8.5% by year end as the scheme is wound down in an environment of weak demand -- that makes further monetary stimulus likely.”
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Companies are already notifying authorities about layoffs to come, putting the U.K. on course for twice as may job losses as in the global financial crisis of 2008-2009, the Institute for Employment said Monday.
British Airways, Virgin Atlantic and London City Airport are among high-profile examples of companies announcing massive job cuts. Sandwich chain Pret a Manger is also shedding staff as fewer people commute to city centers.
The ONS report showed young people bore the brunt of job losses in the latest three months, with employment among 16-24 year olds falling by 156,000. Employment among the over 65s also fell, while all other age groups saw gains.
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