UK unemployment rate slips unexpectedly to 4.9% in February, but payroll numbers fall ahead of reopening

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Britain entered a tough new lockdown in January

The UK unemployment rate fell unexpectedly in the three months to the end of February, data showed on Tuesday, ahead of the country’s latest loosening of coronavirus restrictions.

But the number of employees on payrolls fell by 56,000 in March compared to February, painting a mixed picture about the UK jobs market.

Headline unemployment slipped to 4.9% from December to February from 5% in the previous quarter, the Office for National Statistics said.

It beat economists’ expectations of a rise to 5.1%, but analysts said the figure was flattered by a rise in people becoming economically inactive, meaning they had stopped looking for work.

Yet there were some signs of progress in hiring. The number of vacancies for jobs rose nearly 16% in March compared to February, according to experimental data.

The UK economy is gradually reopening from the tough restrictions that were in place from January to March. On April 12, pubs, non-essential stores and hairdressers were allowed to reopen as the vaccine drive picked up speed.

Britain’s government’s furlough scheme currently pays the wages of roughly one in five employees and has been a key reason that the country’s unemployment rate has stayed relatively low, rising only 0.9 percentage points in the year to February 2021.

“The slight fall in the unemployment rateā€¦ suggests that the government’s job furlough scheme is still insulating the labor market from the worst effects of the pandemic,” Thomas Pugh, UK economist at Capital Economics, said.

However, economists expect the UK unemployment rate to climb once the furlough scheme is wound down towards the end of the year.

James Smith, developed market economist at ING, said: “Like most economists, we expect the unemployment rate to rise this year.”

He added: “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%.”

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UK unemployment rate unexpectedly falls to 5% in January as the country looks ahead to reopening

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The UK is looking ahead to reopening thanks to a rapid vaccine rollout

  • The jobless rate dropped to 5% in the three months to January, from 5.1% in the three months to December.
  • Separate figures showed the number of people on payrolls picked up for the third month in a row.
  • The UK has suffered badly during COVID-19 but is looking to reopen thanks to a quick vaccine rollout.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

The UK unemployment rate fell unexpectedly to 5% in the three months to January, data showed on Tuesday, in an encouraging sign given the country’s plans to gradually lift its coronavirus restrictions.

Britain’s headline unemployment rate fell to 5% from 5.1% in the three months to December, the Office for National Statistics said, beating economists’ expectations of an increase to 5.2%.

Separate figures showed 68,000 more people joined payrolls in February than in January, the third monthly increase, although 693,000 fewer people were on payrolls compared to a year earlier.

“After yet another monthly increase, there were almost 200,000 more employees on payroll in February than three months earlier,” Sam Beckett, head of economic statistics at the ONS, said.

Beckett said that of the almost 700,000 people who have fallen off payrolls, almost two-thirds have been under 25, over half worked in the hospitality sector, and almost a third have been in London.

The UK has suffered over 130,000 deaths from coronavirus and one of the worst economic tolls in the world.

But its unemployment rate has been held down by the furlough wage subsidy scheme. And the country has rapidly rolled out COVID-19 vaccines, allowing it to plot its way out of restrictions by the summer.

Non-essential stores may reopen as soon as April 12 if the government feels cases are under control, with hospitality venues such as pubs potentially allowed to resume business and serve people outside. All restrictions may then be lifted as early as June 21.

“The continued success of the vaccine rollout provides us with hope for the future, and through our plan for jobs, we will continue to support people throughout the months to come,” UK chancellor Rishi Sunak said.

UK markets showed little reaction to the data. London’s FTSE 100 index was down 0.43% in early trading, while the pound was off by 0.4% against the dollar at $1.3806.

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