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U.K. Missing 465,000 People From Workforce Since Covid Hit

U.K. Missing 465,000 People From Workforce Since Covid Hit

Britain continues to face severe labor market shortages despite the end of the furlough program because 465,000 people have disappeared from the workforce since the start of the pandemic, according to Bank of America.

Ending the benefit on Sept. 30 for those out of work during lockdowns was expected to bring people who had given up on job hunting back into employment. “That has not happened yet,” Bank of America economist Rob Wood said in a note on Tuesday.

U.K. payroll numbers jumped by 160,000 to a new high in October, suggesting the economy can absorb many of the 1 million workers who were on furlough when the program closed. Official unemployment for the month of September dropped to 3.9%, lower than immediate pre-pandemic levels. 

“How can the labor market be tight when hours worked are still 2.4% below the pre-Covid peak?” Wood wrote. “Because the workforce shrank 1.4%, or 465k people, since January 2020.”

The Institute for Employment Studies has estimated that there are 950,000 fewer workers in the U.K. now than there would have been at this point on pre-pandemic trends. Half of the missing 950,000 are older workers, a third are migrants and most of the rest are young people who have stayed on in education.

The worker shortage is helping drive up wages and may add to the arguments in favor of a Bank of England interest-rate increase. The central bank has said it’s closely following trends in pay to determine whether inflation will persist. 

Markets expect the BOE to raise rates from 0.1% to 0.25% next month.  

©2021 Bloomberg L.P.