United Kingdom: Labor market remains soft moving into Q4, although furlough extension should support jobs ahead
November 10, 2020
According to the ONS, in July–September the unemployment rate rose to 4.8%—an over three-year high—while redundancies rose at a record pace in quarter-on-quarter terms. Moreover, in October, payroll employment was down 33,000 from September. More positively, job vacancies continued to recover in the three months to October. Taken together, the data highlights the labor market was weak at the back end of Q3 and moving into Q4, although government support schemes continued to limit the extent of the damage.
Looking ahead, the Chancellor’s last-minute decision to extend the furlough scheme until 31 March should preserve jobs and keep a lid on unemployment over the winter. However, there is still the risk of the unemployment rate rising meaningfully once the scheme ends if demand in the economy is still slack.
As Kallum Pickering, senior economist at Berenberg, comments:
“The extension to the policy will delay and, with luck, reduce the eventual correction in the labour market. The four-month extension to the CJRS will push the eventual spike in redundancies from winter when the virus risks are heightened to next spring when, hopefully, virus risks are materially lower and the economic recovery is stronger and can support more rapid job gains.”