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 hits 4-year high in final quarter of 2020 but data shows ‘tentative’ signs of stabilizing

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The UK economy suffered the worst slump in the G7 in 2020

  • The UK unemployment rate rose to 5.1% in the fourth quarter of 2020, the highest since 2016.
  • Yet company payrolls rose in January, when the UK went into national lockdown, suggesting the jobs markets may be stabilizing.
  • The UK suffered the worst slump out of the G7 in 2020 and has seen more than 120,000 deaths.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

The UK unemployment rate hit 5.1% in the final quarter of 2020, its highest since 2016, as tough coronavirus restrictions caused companies to lay off workers, according to official data on Tuesday.

Yet the UK’s Office for National Statistics said there were some “tentative” signs of stabilizing, with separate data showing the number of employees on company payrolls rose by 83,000 in January from December.

The coronavirus pandemic has been particularly painful for the UK, which has suffered more than 120,000 deaths and the worst economic slump in the G7.

However, the UK has been one of the fastest at rolling out coronavirus vaccines. This allowed Prime Minister Boris Johnson to lay out a “roadmap” on Monday that could see the whole of the economy reopened by the summer.

The 5.1% unemployment rate in the final quarter of 2020 was up from 4.7% in the previous quarter and 3.8% a year earlier, the ONS said. It was the highest figure since early 2016.

It meant an estimated 1.74 million people were out of work in the period. That was 454,000 higher than a year earlier.

Yet ONS deputy national statistician Jonathan Athow said that the separate payroll figures “show tentative early signs of the labour market stabilizing, with a small increase in the numbers of employees paid through payroll over the last couple of months.”

Though he added that there are “still over 700,000 fewer people employed before the start of the coronavirus pandemic.”

The UK government’s job support scheme – known as furlough – has kept a lid on unemployment by paying the wages of workers who may otherwise have been laid off. It supported more than 9 million workers at its peak in 2020.

The Bank of England predicted earlier in February that unemployment would rise to close to 8% by the middle of 2021 after the scheme closes. However, chancellor Rishi Sunak is reportedly planning to extend the program in his March 3 Budget, which lays out the Treasury’s economic policies.

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