U.K. Jobless Claims Surged in April as Lockdown Kicked In
U.K. Jobless Claims Surged by 856,500 in April as Virus Struck
(Bloomberg) --
The number of Britons seeking jobless benefits spiked the most on record last month as the coronavirus lockdown sent shock waves through the U.K. economy.
Jobless claims rose 856,500 to more than 2 million in April, the Office for National Statistics said Tuesday. The claimant count rate climbed to 5.8%, the highest in more than two decades. The figures include some people who are still working but have experienced a loss of earnings.
The shutdown of the economy since March 23 is taking a heavy toll, pushing the U.K. into what could be its deepest recession for three centuries. While unemployment is forecast to rise, the government’s furlough program has saved about 8 million jobs, limiting the damage to the labor market.
In a further move to support Britain’s beleaguered businesses, the Treasury announced Tuesday it extended the maximum loan size available through the Coronavirus Large Business Interruption Loan Scheme to 200 million pounds ($244 million) -- a fourfold increase from the previous level.
Firms borrowing more than the original 50 million pounds will be subject to restrictions on dividend payments, senior pay, bonuses and share buy-backs for the duration of the loan, the Treasury said.
The ONS report showed the labor market was in good shape going into the crisis, with the unemployment rate at just 3.9% in the first quarter. Employment surged by 210,000 in the period, though furloughed workers are counted as being employed.
Yet a sharp drop in vacancies signals trouble ahead. Vacancies fell 170,000 in three months to April, the biggest drop since the series began in 2001. Job openings had all but collapsed entirely by the time the lockdown was announced, according to research from the Institute for Fiscal Studies, with the decline coming across the wage distribution.
Hours worked fell 25% in the final week of March, the most since weekly data began in 2008, and tax data for April showed the number of employees fell more than 457,000, a drop of 1.6%, from a month earlier. Both the Office for Budget Responsibility and the Bank of England see unemployment more than doubling to around 10% by June, the highest for over a quarter century.
That would take the jobless total above 3 million for the first time since the de-industrialization of Britain under Margaret Thatcher in the 1980s.
What our Economists Say:
“We forecast unemployment will reach about 7% in 2Q. With the risks to the outlook tilted firmly to the downside, we expect the Bank of England to increase its bond purchase target again next month.”
-- Dan Hanson, U.K. economist. For the full REACT, click here
It’s a picture unfolding around the world. In the U.S., jobless claims have remained in the millions for the past eight weeks. The U.K. claimant data was collected up to April 9.
Separate figures published Tuesday underscored the financial distress being inflicted, with the Department for Work and Pensions receiving more than 550,000 claims for Universal Credit welfare payments in each of the two weeks following the lockdown. The average in a normal week is around 50,000.
Around 2.6 individuals made a declaration -- the process of starting a Universal Credit claim -- between March 16, when Britons were first urged to avoid non-essential travel and contact, and May 12, the DWP also said.
In another report, the Resolution Foundation said that the Britain is experiencing an uneven living standards crisis, with young and older workers most likely to have lost work or had their earnings reduced.
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