Britain’s unemployment rate unexpectedly fell to 4.9% for the second month in a row in the December-February period, of which the country spent mostly under a strict COVID-19 exclusion, official figures showed on Tuesday.
Economists polled by Reuters largely predicted that the unemployment rate, limited by the government’s giant subsidy program, would rise to 5.1% from 5.0% in the three months to January.
The ONS linked the fall to a large number of men leaving the labor market altogether. The so-called inactivity rate rose by 0.2 percentage points in the three months to February, reflecting an increase during the first exclusion of last year.
There was another reminder of the precarious state of the labor market in figures from the UK tax office, which showed that the number of employees on the company’s payrolls fell by 56,000 between February and March, the first drop in four months.
It has increased the total number of jobs lost since the onset of the coronavirus pandemic to 813,000 people, more than half of whom were held by people under the age of 25, with the hospitality in London, the region that hit hardest, the ONS said.
“If we do not act quickly, especially by focusing our support on the long-term unemployed, we are risking another lost generation,” said Tony Wilson, director of the Institute for Employment Studies.
About 363,000 people are classified as long-term unemployed after being out of work for a year or more, but with a similar number in the six to twelve month period, the figure could soon rise sharply.
The UK economy shrank by almost 10% in 2020, a bigger slump than almost all of its European counterparts, after closing later and longer than many of them.
But aided by the rapid implementation of COVID-19 vaccinations, it is lifting its third exclusion, while other countries in Europe have recently tightened their restrictions.
The ONS said there was a clear increase in vacancies in March, especially in sectors such as hospitality, which reopened to extramural affairs last week.
FURLOUGH TAPER
Finance Minister Rishi Sunak extended his advance in March – which pays the wages of about one in five employees – until the end of September, although employers will have to contribute part of the cost from July.
Without the scheme, the unemployment rate would be much higher – a year ago, Britain’s forecasters said it could reach 10%.
The Bank of England will look at how many jobs will be lost when it expires, as it takes into account how long it will take to keep its huge economic stimulus program in place.
Suren Thiru, head of economics at the British Chambers of Commerce, said that long-term unemployment, especially among young people, could mean that progress towards pre-pandemic levels in the labor market lagged behind the broader economic recovery.
“Further action will be needed to support the labor market when the furlough scheme is terminated, including supporting businesses to recruit and retain staff through a temporary reduction in the contributions of the national insurance employer,” he said.
Britain’s headline measure of wage growth rose sharply again in the three months to February, by 4.5% in annual terms.
But the ONS said the reading was higher due to a decline in the number of lower paid and part-time posts. After calculating this, salary growth was much weaker by 2.5%.
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