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  • Emma Walsh

UK unemployment drops as firms hire amid Covid easing

UK employers who were getting ready for the easing of lockdown started hiring again in March, driving down unemployment for a third consecutive month, according to official figures.

The number of adults seeking work fell to 1.6 million in the three months to March, compared with 1.7 million in the three months to February, the Office for National Statistics said.

The quarterly rate was down to 4.8% from 4.9% in February, amid broader signs of recovery in the jobs market as progress with the Covid-19 vaccine programme helped give companies confidence to take on more staff. City economists had forecast the unemployment rate to remain unchanged at 4.9%.

The improvement helped push the pound briefly above $1.42 against a weaker dollar on the international currency markets, the highest level since February, amid hopes for a stronger economic recovery from the pandemic.

According to the latest snapshot, the number of employees on company payrolls rose for the fifth consecutive month, but remained 772,000 below pre-pandemic levels, in a sign of the ground still to be made up. The biggest falls in employment came in the hospitality sector among those under 25, and among those living in London.

Early indicators show that the number of job vacancies continued to rise into April as non-essential shops and outdoor hospitality reopened in England and Wales, with most industries displaying growth, notably in the accommodation and food service sectors.

However, the number of roles on offer remains below pre-pandemic levels, with arts, entertainment and recreation, and the hospitality sector worst affected.

The picture of strength emerging in the jobs market also comes with as many as 4.2m jobs furloughed at the end of March according to separate figures from HMRC, as the multibillion-pound emergency wage scheme prevents a higher rate of unemployment while the economy remains under pressure.

The figures covering the period after the government announced its roadmap out of lockdown showed a rise of 84,000 in the number of people in work for the three months to the end of March as companies hired more full-time staff to prepare for the reopening.

The employment rate rose to 75.2%, equating to almost 32.5 million workers, in the first increase since the pandemic began. However, it remains 1.4 percentage points below its pre-crisis level.

Although dropping to 4.8%, the unemployment rate is still higher than the 4% rate before the pandemic. The Bank of England estimates that the rate will peak at close to 5.5% after the furlough scheme ends, significantly lower than the worst-case forecasts made last year which predicted a rerun of the 1980s, when unemployment soared close to 12%.

It also represents a much lower peak for unemployment than after the 2008 financial crisis, when the jobless rate rose from 5.2% in late 2007 to a peak of 8.5% by the autumn of 2011.

The chancellor, Rishi Sunak, said the extension of furlough and self-employed support schemes beyond the end of its roadmap for easing restrictions in England was helping to protect people’s jobs while the economy reopens.

“Protecting and creating jobs continues to be my top priority. While sadly not every job can be saved, nearly 2 million fewer people are now expected to be out of work than initially expected – showing our plan for jobs is working,” he said.

However, economists warned there were still worrying trends in the jobs market , following the fastest growth in long-term unemployment for more than a decade in the past year.

Young people have been affected by the pandemic in particular, leading to falls in both employment and unemployment as young people stay away from the jobs market altogether, either by continuing in education or not looking for work.

Unemployment is expected to rise once furlough is made less generous in July and removed entirely by the end of September, while tough government restrictions remaining in place in response to new Covid-19 variants and a fresh wave of infections would derail recent improvements.

From July, employers will need to contribute 10% of an employee’s wage, rising to 20% in August, as taxpayer support is cut from the current level of 80%. Employees will continue to receive the same amount.



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