United Kingdom: Labor market remains solid in Q1
April 20, 2021
According to the ONS, in December–February the unemployment rate dipped to 4.9% from 5.0% in the previous rolling quarter. Experimental data for March showed that employment dipped slightly from February, although job vacancies appeared to rise notably in March and early April as firms anticipated the easing of restrictions. Taken together, the data highlights that the labor market remains in robust shape notwithstanding the national lockdown, aided by the government’s wage subsidy scheme (furlough).
The unemployment rate is still likely to increase somewhat later this year as government labor market support is wound down, although the extension of the furlough scheme until end-September should delay the rise in unemployment and also limit the extent of the rise.
According to James Smith, economist at ING:
“A combination of the end of the furlough scheme, and to a lesser extent a potential increase in inbound UK migration later this year (partly reversing last year’s population fall) are both likely to trigger a temporary spike in the jobless rate to 6–6.5%. Yet we think the keyword there is temporary. […] we think the jobs market recovery from the Covid-19 crisis could be quicker than after past recessions, given how unusually concentrated last year’s job losses were in the consumer services industry. Past jobs recessions have shown that these sectors tend to bounce back faster, perhaps because jobs are created more quickly than elsewhere, while employee turnover is also typically much higher in normal times than other industries.”