UK jobless claims soared 69.1 per cent – or by 856,000 – to 2.1m in April, unemployment data showed today to illustrate the staggering impact of coronavirus on the economy.
And the UK unemployment number increased by 50,000 to 1.35m as lockdown started in March, according to the Office for National Statistics (ONS).
The ONS estimated the UK unemployment rate at 3.9 per cent between January and March, slightly higher than the previous quarter.
Employment hit a record high of 76.6 per cent before lockdown began, the ONS data also showed.
However, as well as jobless claims spiking, the total number of weekly hours worked posted its largest annual drop in a decade.
Total hours worked dropped six per cent in the penultimate week in March and by another 16 per cent in the last week that month. By the final week the total number of hours worked fell 25 per cent lower than other weeks in the first quarter.
And work and pensions secretary Therese Coffey told the BBC the data showed this was an “unprecedented emergency”. She added that the government expects the unemployment rate to jump over the second quarter.
“I think we should be prepared for the unemployment rate to increase significantly,” she said.
And economists warned today’s data was just the start as they predicted sharp spikes in unemployment in the coming months as a result of the coronavirus lockdown.
UK faces sharp rise in jobless claims
Capital Economics’ UK economist, Andrew Wishart, warned the April jobless claims data suggests the unemployment rate could hit six per cent and eventually nine per cent.
People do not have to be unemployed to make claims for assistance but it is indicative of job market trends.
“The headline statistics covering January to March showed remarkably little sign of the coronavirus crisis,” he said.
“However, the timelier HMRC data on the number of people paid through the tax system showed a monthly fall in employment of 464,000 which is consistent with a rise in the unemployment rate to about 5.5 per cent.
“And the claimant count suggests that is on the low side. With thousands of people already laid off as a result of the coronavirus lockdown, we forecast that the unemployment rate will jump from four per cent to almost nine per cent in the coming months. Most of that jump should quickly be reversed once the lockdown ends, but we still expect the unemployment rate to remain elevated over the next few years.”
Unemployment rate could hit double digits
Meanwhile, Jagjit Chadha, director of the National Institute of Economic and Social Research, told the BBC: “We can reasonably expect unemployment to rise very quickly to something over 10 per cent – something we haven’t seen since the early 1990s.”
The increase of 856,000 jobless claims is the biggest since records began in 1971.
And economists warned the outlook for the UK economy suggests they may stay unemployed for some time.
“The 24.8 per cent year-over-year drop in three-month average measure of job vacancies in April – the steepest since October 2009 – suggests that very few unemployed people will be able to find a job quickly,” Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said.
James Reed, chairman of the recruiter Reed, added that today’s figures suggest the UK faces a “very tough fightback from this recession”.
He predicted unemployment could rise above 15 per cent to affect more than 5m workers.
And he said despite the extension of the furlough scheme into October, “we’re still unclear about which support structures will be available for employees and businesses post-July”.
“For businesses considering restarting some or all of their operations, lifting staff out of furlough will be a challenge – it will take a while to get people back to work,” Reed added.
‘Tip of the iceberg’ for UK jobless claims
“This is only the tip of the iceberg,” job site Indeed’s UK economist Jack Kennedy added. “Our real-time data shows there was only worse to come with overall vacancies on Indeed plunging minus 57 per cent on last year’s trend. Beauty, hospitality, travel and food preparation industries [were] hardest hit.
“The hope is that as restrictions are slowly eased and some sectors start to reopen, the jobs market will spring back to life. While that might seem a little sanguine, we have already started to see signs of jobseekers reacting to a potential thawing of conditions with spikes in searches for jobs in education and at garden centres.”
Govt ‘should extend furlough again’
Charlotte Alldritt, director of the Centre for Progressive Policy, added that the early data gives “cause for concern”.
She called for chancellor Rishi Sunak to extend the job retention scheme for the most badly hit industries.
“The government’s immediate focus must be to protect people and places hardest hit,” she said. “Nationally, the Job Retention Scheme will likely need to be extended beyond October for the worst affected sectors. Any kind of cliff edge would be catastrophic to jobs and livelihoods across the UK.”
Earnings growth set to shrink further
Howard Archer, chief economic adviser to the EY Item Club, said the furlough scheme helped to limit UK unemployment in April, despite the record rise in jobless claims.
Still, early estimates on employment from pay-as-you-earn data showed paid employment fell 1.6 per cent in April from March.
He warned that earnings growth slumped in March, however, and “look set to be significantly impacted over the coming months”.
“The IHS Markit Household Finance survey for May reported that “incomes from employment fell drastically and at an accelerated rate during May”.