Yahoo Finance UK unemployment rate drops again as firms hire more staff
UK unemployment fell for the fourth month in a row in April as businesses took on more staff in response to the relaxation of Covid-19 restrictions.
The Office for National Statistics said the jobs market showed further signs of recovery as non-essential shops and hospitality venues were allowed to open outdoors across the UK.
The unemployment rate fell to 4.7% in the three months to April, representing about 1.6 million people, in a modest improvement from 4.8% in the three months to March.
Related: Rishi Sunak rejects calls by businesses for furlough extension
Businesses hired staff to cope with a rush of pent-up demand from lockdown-weary consumers, and the number of staff on company payrolls rose for a sixth consecutive month according to figures for May from HMRC, increasing by 197,000 to 28.5 million.
However, this remains 553,000 below levels recorded before the Covid-19 pandemic struck. Young adults, workers in hospitality and those living in London have borne the brunt of job losses in the past year.
Watch: What UK government COVID-19 support is available?
The latest figures come after Rishi Sunak rejected business demands to extend the furlough scheme despite the four-week delay for the easing of Covid-19 restrictions previously set for 21 June. Business leaders and Labour have warned failure to provide fresh economic support would risk thousands of job losses this summer, as the furlough scheme is wound down from the start of July.
Rachel Reeves, the shadow chancellor, said the jobs market remained fragile with employment half a million below pre-pandemic levels. “For sectors like hospitality, tourism, and our music industry that continue to be affected by restrictions, a month is a long time. Many businesses have financial pinch points coming up but are still struggling to turn a profit,” she said.
“If businesses have to stay closed or operate at massively reduced capacity they’re not going to be able to pay staff, rents and loans back. Government support must recognise that.”
About 1.8 million workers remained on furlough by mid-May, according to the latest official figures, including up to a fifth of the total hospitality workforce. The scheme will force employers to contribute 10% of an employee’s wage from the start of July, rising to 20% in August, as taxpayer support is cut from the current level of 80%. Employees will continue to receive the same amount.
Sunak said the government’s plan for jobs was working. “We understand the value of work and the distress caused by unemployment – that is why we are continuing to support people and jobs,” he said.
“The furlough scheme is running all the way through until September and we are creating new routes into work through apprenticeships, Kickstart placements for young people as well as targeted support for the long term unemployed.”
The Treasury is understood to be resistant to a furlough extension as employers report issues with labour shortages after the easing of lockdown earlier this spring. According to the latest snapshot from the ONS, the number of job vacancies in the three months to May jumped to 758,000, only 27,000 below its pre-pandemic level, with the biggest rise in the accommodation and food services sector.
Watch: Businesses plead for taxpayer aid to be extended
The rate of redundancies reported in the three months to April also decreased by a record 7.1 per 1,000 employees to 4.0 per 1,000 employees, back in-line with pre-pandemic levels.
However, economists believe issues with employers struggling to recruit will fade over the coming months after suffering from a bottleneck moment as the economy reopens.
Nye Cominetti, a senior economist at the Resolution Foundation, said almost 3m jobs still needed to be created to return the UK labour market to pre-pandemic levels. “While this welcome hiring surge is rapid, it is also far from complete,” he said.
“With emergency support starting to be phased out over the next few weeks, and ended completely by October, this gap will need to be closed a lot more to prevent a worrying rise in unemployment later this year.”
The Bank of England forecasts unemployment will rise after the furlough scheme ends, peaking at 5.5% later this year. The jobless rate stood at 4% before the pandemic struck.
The figures fall a long way short of the initial fears, last year, that unemployment could reach 12% as a result of what was expected to be the worst recession in 300 years.
Watch: What is a recession?
