UK Employment Figures, September 2020: Unemployment Is Starting to Rise
Furlough scheme limited damage to UK labour market over the summer.
Today’s ONS data show the labour market in a holding pattern over the summer, protected by the government’s furlough scheme. On the positive side, hours worked recovered slightly in July, the number of employees on payrolls declined only 36,000 from July to August, and vacancies edged up to 504,000. But with vacancies still 38% down on a year ago, unemployment remains a big risk.
The headline unemployment rate has picked up from the record low rate of 3.9% at which it held during the three months following March. But even at 4.1%, that paints a deceptively rosy picture. The single-month July figure of 4.4% and the experimental figure of 4.8% for the last week of July show that unemployment is starting to rise. The big question is: how many of the furloughed jobs will the labour market re-absorb before the job retention scheme finishes at the end of October?
As a reminder of the looming hazard, the data showed 156,000 redundancies in the UK in the three months to the end of July. That was the largest annual and quarterly increases seen since 2009, yet is likely to be the tip of the iceberg following a further swathe of redundancy announcements since then.
Though the Chancellor has been adamant that the job retention scheme will not be extended, he hinted today that targeted support for the worst-hit sectors, many of which remain subject to significant capacity restrictions, may be on the way. This might include wage subsidies, short hours schemes and/or government funded job creation.
That could help limit the damage between now and the end of the year. Though the wide range of forecasts for the unemployment rate is striking, the majority of projections — even at the less pessimistic end of the scale — anticipate a jump of a speed and severity that will entail considerable pain.
Jack is an Economist on the Indeed Hiring Lab who focuses on the UK/Ireland labour market. Before joining Indeed, Jack was a senior economist at Nationwide Building Society and prior to that at global information provider IHS Markit. He holds an MSc in finance and economic policy from SOAS, University of London and a BSc in economics and finance from the University of York.