U.K. Companies Start Hiring Again, Holding Back Unemployment
(Bloomberg) -- U.K. companies have started hiring in anticipation of an end to the coronavirus lockdowns, holding back the overall rate of unemployment.
The number of employees on payrolls rose 68,000 in February, the third consecutive monthly increase, the Office for National Statistics said on Tuesday. Job vacancies from December to February increased by 8% to a total of 601,000.
The jobless rate edged up to 5% in the quarter through January, less than the 5.2% rate expected by economists. It offers a glimmer of hope that the U.K. could soon start to recover from its worst recession in three centuries, helped by Chancellor of the Exchequer Rishi Sunak’s decision to prolong furlough payments to those whose workplaces were closed during the pandemic.
“The labor market is showing some signs of resilience,” said Tej Parikh, chief economist at the Institute of Directors, a lobby group representing company executives. “Vacancies are likely to start growing again meanwhile, as businesses look to bounce back as restrictions wind down.”
The more positive tone was reinforced by a separate survey from the Confederation of British Industry, which showed manufacturing order books this month at their strongest since April 2019. Hanging over the outlook, however, are Brexit-related stock shortages and an expected pickup in prices as firms pass on higher global freight costs, the business lobby said.
The labor market report coincided with two separate national lockdowns, which closed all non-essential shops, bars and restaurants. The latest restrictions started in January. The total number of payrolled employees remains 693,000 lower than where it was in February 2020, just before the pandemic struck.
Sunak hopes that the wage-subsidy program, the most expensive part of an economic support package now totaling around 350 billion pounds ($484 billion), will protect workers as the economy gradually reopens over the next three months. The chancellor announced in his budget this month that furlough payments will continue until the end of September, rather than end in April as previously planned.
“Coronavirus has caused one of the largest labor market shocks this country has ever faced, which is why protecting, supporting, and creating jobs has been my focus throughout this crisis,” Sunak said in a statement. “The continued success of the vaccine rollout provides us with hope for the future.”
What Our Economists Say ...
“We expect more job losses this year, but the government’s decision to extend the furlough scheme earlier this month will help limit the damage. It should also raise the chances of a rapid recovery as the lockdown is eased.”
--Dan Hanson, Bloomberg Economics. Click for the full REACT.
The jobless rate, which was actually down from 5.1% in the three months through December, was restrained by a leap in the number of people counted as economically inactive, primarily students. An expected increase in unemployment this year may be driven by those currently outside the labor force starting to look for work, rather than people losing their jobs.
The number of people in employment fell by 147,000 during the latest three months, with those who were self-employed accounting for almost all of the decline. That largely reflected a weak December, and the month of January alone saw a 220,000 increase in employment, the ONS said.
The Office for Budget Responsibility now sees jobless rate peaking at 6.5% in the fourth quarter, or about 2.2 million people. That’s lower and later than previously estimated. It’s also significantly below the peak of recessions in previous decades, despite the economy enduring its deepest slump for three centuries last year.
“Many sectors are now tentatively getting back on their feet, and outside of consumer services employment has been improving,” said James Smith, developed markets economist at ING. “We think the unemployment rate could reach 6% to 6.5% later this year. Unlike previous jobs crises, the peak may not last for long.”
Growth in average earning excluding bonuses accelerated to 4.2%, the fastest since 2008. The ONS pointed out that the increase reflected that fact that that there are fewer lower-paid jobs as a result of the pandemic. Underlying pay growth is around 2.5%.
©2021 Bloomberg L.P.