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United Kingdom Unemployment November 2020

United Kingdom: Labor market appears fairly tepid in Q4, although government wage support limits the damage

According to the ONS, in August–October the unemployment rate rose to 4.9%—an over four-year high, and up from 4.8% in the previous rolling quarter. Moreover, experimental weekly data shows the unemployment rate rose well above 5% in the month of October, while in November the claimant count edged up and payroll employment was down month-on-month. That said, job vacancies continued to recover in the three months to November. Taken together, the data highlights that while the labor market has slackened so far in Q4 amid the tightening of domestic restrictions, ample fiscal support has acted as a cushion.

Looking ahead, the unemployment rate is seen continuing to rise in the coming months on ongoing restrictions on activity. The rate is seen declining from H2 next year amid a likely easing of restrictions as the coronavirus vaccine is rolled out, although the end of the government’s wage subsidy scheme in March 2021 poses an upside risk.

As James Smith, economist at ING, comments:

“We think that unemployment will have risen further in the final months of 2020, and could reach 6% by the end of the year. There is a risk of a more pronounced rise in 2021 depending on how/when the current level of wage support is removed—and whether those sectors that have remained fully closed since March (eg nightlife, events etc) are able to reopen at that point.”

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