U.K. Jobs Market Gains More Than Expected as Lockdown Eases

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The U.K. labor market strengthened more than expected in April as the economy began to emerge from coronavirus restrictions.

The number of people on payrolls rose 97,000, and vacancies increased 13%, the Office for National Statistics said on Tuesday. The jobless rate in first quarter fell unexpectedly to 4.8% as employment surged 84,000, the first gain since the pandemic struck.

The jobs outlook has improved significantly in recent months, with the government announcing plans to fully reopen the economy by June 21 and then extending wage support for furloughed workers until the end of September. It’s shifted the debate toward when the Bank of England will start tightening monetary policy.

“We are likely to see the number of vacancies mounting further,” said Tej Parikh, chief economist at the Institute of Directors. “Some firms may even be unable to find and onboard staff as quickly as they need to.”

U.K. Jobs Market Gains More Than Expected as Lockdown Eases

The central bank now expects unemployment to peak at just 5.4% in the third quarter instead of a previously estimated 7.9%, despite the economy last year experiencing its deepest contraction in three centuries.

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“The jobless rate will fall in the near term as the demand created by reopening the economy creates new jobs, while the furlough program protects those who might otherwise have been laid off. While not our base case, the big risk is that virus mutations delay the easing of restrictions and the recovery loses momentum.”

--Dan Hanson, Bloomberg Economics. Click for the full REACT.

U.K. Jobs Market Gains More Than Expected as Lockdown Eases

A separate study published Tuesday showed that over the longer term, Britain is facing a decade of major change that could leave it economically on par with Italy instead of leading the pack of European nations. The Resolution Foundation and the Centre for Economic Performance at the London School of Economics said the pandemic, Brexit, climate change targets and a drop in the population threaten to make the U.K. poorer in the decades ahead.

The jobs report also showed:

  • The number of vacancies climbed to 747,000 in April, the most since March 2020
  • Job openings in accommodation and food services surged 71% in the month
  • The increase in payrolled employment in April was the largest since January 2015
  • The gain in employment of 84,000 was stronger than the 50,000 expected by economists
  • The number of jobless claims, which also include people on low incomes, fell by 15,100 in April
  • The number of payrolls is still 772,000 lower than in Feb. 2020 before the pandemic arrived in the U.K.
  • The number of unemployed people fell 121,000 in the first quarter
  • Inactivity where people drop out of the jobs market rose 48,000 for those aged 16 to 64
U.K. Jobs Market Gains More Than Expected as Lockdown Eases

England this week took its biggest step yet toward returning to normal life with the reopening of indoor hospitality for the first time in five months. In April, non-essential stores welcomed back customers. In a further boost, Amazon Inc. said last week it will hire 10,000 more people in the U.K.

However, hopes for the strongest economic rebound in decades are being overshadowed by the highly transmissible Indian variant of coronavirus, which has been found in dozens of districts across the country. Prime Minister Boris Johnson has warned the final stage of lifting restrictions could be delayed by the outbreak and urged people to get vaccinated.

Unemployment is set to peak at a far lower level than in the aftermath of previous recessions. That’s largely due to the tens of billion pounds of public money spent on keeping furloughed employees on payroll. Economists assume that only a fraction of 4.2 million people furloughed at the end of March will end up out of work.

U.K. Jobs Market Gains More Than Expected as Lockdown Eases


In the hospitality sector, many firms are struggling to fill vacancies. Bars, restaurants and leisure venues relied heavily on migrants workers, many of whom left the U.K. during the pandemic. Others are reluctant to return to an industry facing an uncertain future.

Still the crisis leaves an uneven mark on the labor market. A key challenge for the government is getting young people back to work, with unemployment among 18 to 24-year-olds running at double the national average.

Average wages excluding bonuses grew 4.6% in the quarter through March. However, the figures have been skewed by the loss of lower-paying jobs, and the ONS estimates the underlying growth rate is around 3%. Pay and inflation pressures could be fueled by labor shortages.

©2021 Bloomberg L.P.

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