United Kingdom: Furlough scheme continues to buttress the labor market, notwithstanding fresh lockdown
According to the ONS, in October–December the unemployment rate rose to 5.1%—an over four-year high, and up from 5.0% in the previous rolling quarter. Experimental data for January showed the claimant count was broadly stable and employment picked up slightly from December, while job vacancies continued to recover in the three months to January. Taken together, the data highlights that the government’s wage subsidy scheme (furlough) is significantly limiting the damage to the labor market, despite the tough nationwide lockdown in force since early January.
In December, the chancellor announced the extension of the furlough scheme until end-April, with the government continuing to contribute 80% towards employees’ wages, and recent comments by the Prime Minister suggest the scheme could be extended further to support firms as long as Covid-19 restrictions remain in place. This should stem the rise in unemployment early this year, although there is still the risk of a more meaningful increase in job losses once the scheme ends.
According to James Smith, economist at ING:
“Whichever way an extension is structured, there will inevitably be some jobs that are no longer viable as a result of the pandemic. The latest weekly jobs data indicates there are just shy of a million workers who have been ’temporarily away from their job’ for at least three months, a rough proxy for those who either work in sectors that have never reopened, or whose jobs aren’t likely to come back.”