UK: Jobs market turns a corner as unemployment rate falls

The latest UK employment data provides further signs that the jobs market has begun to turn a bit of a corner since the turn of the year. Despite the recent lockdown, the unemployment rate slipped to 4.8% in the three months to March. And actually if we look at more timely weekly data, the rate averaged 4.6% in the last six weeks of the first quarter – going briefly as low as 3.9% (though this data is pretty noisy).

While the furlough scheme has succeeded in stemming the tide of redundancies we saw in the hard-hit sectors last autumn, we’re seeing some tentative improvement elsewhere. Admin and support roles, for instance, have seen a strong rebound according to payroll data.

Having said that, there is little doubt that we will see a rise in the jobless rate when the furlough scheme ends in September, though the peak is likely to be significantly lower than feared a few months ago. Barring a return to tighter Covid-19 restrictions, the fact that the job support is being offered until well after the April/May reopening phases should give firms enough time to rebuild their finances to be able to return most, if not all, of their staff from furlough. Where jobs are lost, it’s likely to be largely where roles no longer exist, for example because of structural change created by the pandemic.

It’s hard to tell how many roles might fall into this category, although one encouraging detail in the latest jobs figures is that the number of people whose job is on hold due to Covid-19 and not being paid, has fallen.

We expect the jobless rate to peak at around 6% in the autumn, though we think things are likely to be improving again by year-end.

This crisis is unusual in that such a high proportion of jobs already lost are in the hospitality/consumer services sectors, which has tended to see hiring rebound after past unemployment spikes faster than the wider jobs market. Jobs tend to be created more quickly/easily, perhaps because hiring tends to be in less secure and lower-paid forms of work. Employee turnover is also typically above average in hospitality/entertainment etc.

Indeed, we can already see signs of a rapid turnaround in the hospitality sector over recent weeks, where online job adverts have returned quickly to pre-virus levels since the reopening road-map was announced. While this is a ‘flow’ measure and clearly isn’t the same as saying employment has returned to where it was before the pandemic, it does suggest some of the past employment losses we’ve seen over recent months could be quickly reversed over coming months.