United Kingdom: Labor market remains soft at end-Q3, worse to come in fourth quarter
October 13, 2020
According to the ONS, in June–August the unemployment rate ticked up to 4.5%—an over three-year high—while redundancies rose at a record pace in quarter-on-quarter terms. Moreover, the number of people on payrolls in September was down 673,000 from March, while the claimant count ticked up to 2.7 million in the same month.
Taken together, this data highlights that the labor market was weak towards the end of the third quarter, although the reopening of the economy did spur wage growth and an increase in vacancies.
Looking to the final quarter, unemployment is expected to rise markedly as the original furlough scheme ends and the impact of new restrictions bites. However, the battery of support measures announced by the government—including a less comprehensive version of the furlough scheme, wage subsidies for employees working less than normal hours, and a job retention bonus—should go some way towards stemming the damage.
Regarding the revamped furlough scheme—which will pay 67% of employees’ salaries for those businesses forced to close due to new restrictions—James Smith, economist at ING, comments:
“There will be businesses that aren't formally required to close, but that are hit indirectly (think hospitality suppliers). And even outside of the Covid-19 hotspots, we're likely to see the recovery in consumer spending falter over coming weeks, either as a result of some of the other restrictions (eg limits on household mixing) or out of renewed caution as the virus spreads. That’s likely to put renewed pressure on hiring plans across the UK, which based on vacancy data, have been revived to some extent over the summer months.”