More than 600,000 people fell off payrolls between March and May as experts warned that the UK was on course for the biggest jobs crisis in at least a quarter of a century. official figures showed.
Universal Credit and Jobseeker’s Allowance claims jumped 23.3 per cent between April and May to 2.8 million, the latest official figures show. The claimant count has now soared 125.9 per cent, or 1.6 million, since March when the UK entered lockdown to slow the spread of coronavirus.
Average real wages fell for the first time in more than two years and job vacancies plunged 60 per cent in just two months, Office for National Statistics data revealed on Tuesday.
The number of people temporarily out of work, including furloughed workers, rose by six million at the end of March into April, leading to a large fall in total hours worked.
The total number of weekly hours worked in the three months dropped by 94.2 million (8.9 per cent) in the three months to April – the sharpest annual fall on record.
The disastrous employment figures come days after official data showed the UK economy shrunk by a fifth in the first month of lockdown.
According to early estimates, the number of paid employees dropped by 2.1 per cent or 612,000 in May compared with March as employers laid off staff and stopped hiring.
Average pay growth slowed “notably” in April 2020, the ONS said, and the three months to April saw total pay fall 0.4 per cent, the first inflation-adjusted fall since January 2018.
Vacancies also disappeared at a rapid pace. Experimental single-month estimates indicated the number of vacancies fell 60 per cent, from 818,000 to 476,000 between March and May 2020 as employers stopped hiring.
The official headline unemployment rate between February and April remains low at 3.9 per cent, up 0.1 per cent on last year.
However, the figures lag behind the real situation in the economy which is likely to be significantly worse. The number of people in employment fell by 430,000 between March and April, and more timely HMRC data suggest that the number of employees continued to fall by 160,000 in May. This rise has not yet shown up in the unemployment figures because many of those recently out of work have not actively sought new employment due to the lockdown, according to the Resolution Foundation think tank.
Economists forecast that unemployment could hit 11 per cent by the end of the year as emergency government support schemes close.
The Claimant Count, which includes Universal Credit and Jobseeker’s Allowance claims, jumped more than doubled between March and May to 2.8 million. The ONS cautioned that it is not possible to say what proportion of these claimants are unemployed and which are in employment but are low-paid and so entitled to claim benefits.
Neil Carberry, chief executive of the Recruitment and Employment Confederation, said: “The headline figures may not show it, but a lot has changed since April – with the Claimant Count rising to 2.8 million, the unemployment rate is likely to be much higher than 3.9 per cent now.
“But with the lockdown being eased and the economy opening up, hiring should grow. The scale of the growth in unemployment through the rest of the year will depend on consumer confidence and how employers react to the winding down of the furlough scheme.”
A big concern for businesses and the government is what happens when the Job Retention Scheme (JRS), which is currently paying the wages of 9 million furloughed workers, winds down.
The furlough scheme closed to new applicants last week and from 1 July, employers will have to contribute to workers’ wages as the scheme is tapered down by the end of October.
“The true impact of the crisis on the labour market is likely to only be revealed once the JRS starts unwinding in the second half of the year,” said Yael Selfin, chief economist at KPMG UK.
“Many businesses are expected to bring only part of their furloughed workers back, while they seek to tentatively reopen after the lockdown. Hiring new workers is also likely to be put on hold for some time.
“This means we could see the rate of unemployment average 11 per cent next year – and the last time it reached these levels was during the recession in the 1980’s.”
Frances O’Grady, general Secretary of the Trades Union Congress (TUC) called on the government to introduce a job guarantee to protect millions who may soon be out of work.
“The labour market is on red alert,” Ms O’Grady said.
“We need strong action now to stop lasting economic damage. The government must work closely with unions and business at national and industry level to get the next steps right.
“The plan for recovery has to prioritise protecting and creating jobs. Getting people back into work is the only way out of recession. That’s why we need a job guarantee scheme to help those who lose work, especially young workers.”
TUC analysis suggests that young people face a particularly pronounced spike in unemployment. Some 890,000 people aged under 25 work in either accommodation and food or arts, entertainment and recreation.
Jonathan Athow, deputy national statistician at the ONS, told BBC Radio 4’s Today programme: “There is a lot going on in the labour market at the moment. In the two months to May we saw a 600,000 fall in the number of people on the payroll. So, we are starting to see a worsening, worsening labour market.”
Mims Davies, the minister for employment, said: “Today’s figures are starting to show the impact of Covid-19 on our economy, but our furlough scheme, grants, loans and tax cuts have protected thousands of businesses and millions of jobs, setting us up for recovery.
“Already our nationwide network of work coaches have moved in to support jobseekers across sectors and match them with employers who are recruiting. By responding to the needs of communities across the UK they will be at the heart of our revival and renewal, helping people find new roles and move forward with their lives.”