Unemployment in the UK is set to double in the next few months and economists are bracing for the coronavirus outbreak to hit harder than the financial crisis.
Despite the government’s attempts to incentivise employers to keep staff on, investment bank Nomura predicts the effect of the pandemic will hit “multiple times that of the global financial crisis.”
Nomura expects an unemployment rate of eight per cent in the April to June quarter, rising 0.5 per cent in the following three months. According to the Sunday Times, the eight per cent would be the equivalent of an additional 1.4 people in unemployment and a total number of 2.75m.
The UK unemployment rate has generally fallen since late 2013, and in the three months to January 2020 was estimated at 3.9 per cent. An estimated 1.34m were unemployment, 5,000 more than a year earlier but 515,000 fewer than five years earlier, according to ONS data.
Nomura predicts a 13.5 per cent drop in GDP in the second quarter, which is more than six times the biggest quarterly fall during the 2008 crash. However, a partial recovery in the third quarter is expected.
The think tank Resolution Foundation has called for the postponement of the increase in the National Living Wage to £8.72, due next week.
“The central reason is that increasing the minimum wage in a downturn makes low-paid workers more vulnerable to unemployment, by making them relatively more expensive to employers looking to cut costs.”
“And we should be in no doubt about the scale of the downturn that is coming,” the think tank added.
Last week the number of Americans claiming unemployment benefits skyrocketed at the fastest pace on record as coronavirus laid waste to the economy.
“Unemployment rates will be the equivalent to infection rates look ahead,” said Christian Scherrmann, US economist at asset manager DWS. The rise in initial claims for unemployment benefits in the US from 280,000 to 3.2m in one week “gives an indication of the troubles to come.”