A measure of the number of people claiming unemployment benefits in the United Kingdom leapt to its highest level since 1996 in April, the first full month of the government’s coronavirus lockdown.
The claimant count rose by 856,500 – the biggest ever month-on-month jump – to 2.097 million, a 69 percent increase, the Office for National Statistics (ONS) said on Tuesday.
The surge would have been even sharper without a government programme to pay 80 percent of the wages of workers put on temporary leave by their employers, who do not count towards the unemployment total.
The ONS said emergency changes to the UK’s welfare system meant the claimant count number included more people who were still actually in work than normal, but the scale of the rise in claims showed the hit to the labour market.
“In March, employment held up well, as furloughed workers still count as employed, but hours worked fell sharply in late March, especially in sectors such as hospitality and construction,” ONS Deputy National Statistician Jonathan Athow said.
“While only covering the first weeks of restrictions, our figures show COVID-19 is having a major impact on the labour market.”
Tej Parikh, chief economist at the Institute of Directors, said the government’s wage subsidy scheme was holding off some job losses for now but it was not clear how firms would react when they are required to help fund it from August.
“Many companies will still be in the middle of a cashflow crisis, and will struggle with any cost increases. Government faces an onerous task in winding down the scheme without causing too much pain,” he said.
Experimental data for jobs in April, based on tax figures, showed the number of people on companies’ payrolls fell by 1.6 percent from March and were 1.2 percent lower than a year before.
Vacancies fell by the most on record in the February-April period, down 170,000 to 637,000, with hospitality job openings falling the most.
Other data published by the ONS served as a reminder of how strong the UK’s labour market was going into the COVID-19 crisis.
The UK’s unemployment rate fell to 3.9 percent in the January-March period – covering only one week of the lockdown which began on March 23 – from 4 percent in the three months to February.
But with much of the economy shut down by the government to slow the spread of coronavirus, the UK could be heading for its sharpest economic slump in more than 300 years, the Bank of England has warned.
The country’s budget forecasters have warned the unemployment rate could hit 10 percent in the April-June period, even with millions of workers shielded by the government’s scheme to pay their wages while they are temporarily laid off.
British finance minister Rishi Sunak said on Monday eight million employees were now covered by that scheme and more than two million claims had been made under a parallel programme for self-employed workers.
Productivity fell sharply in the first quarter, with output per hour worked down by 1.1 percent from the final quarter of 2020. Output per worker – which includes those on furlough – was down 2.9 percent compared with a year earlier, the biggest fall since 2009.
Amid the downturn, UK investors on Monday began to price in the possibility of the Bank of England overcoming its long-standing reluctance to take rates below zero from the end of 2020 as it contemplates what could be the biggest economic slump in three centuries.