The UK unemployment rate rose to 4.8 per cent in the three months to September, driven by the largest quarterly number of redundancies on record, official data showed on Tuesday.
The figures reflect a wave of job cuts made by employers as they prepared for the phasing out of the government’s furlough scheme — which was due to close at the end of October but has been extended until the end of next March.
Redundancies climbed to a record high of 314,000 in July to September — a rise of 195,000 from the previous year and 181,000 from the previous quarter, the ONS said. Weekly figures showed especially strong growth during the first two weeks of September — when employers had to pay more towards the cost of furloughed workers in the run-up to the scheme’s scheduled October end.
Tej Parikh, chief economist at the Institute of Directors, said that while the extension of furlough was welcome, “unfortunately, the change appears to have come too late in the day for some”.
The chancellor, Rishi Sunak, said the figures “underline the scale of the challenge we’re facing”, adding: “I want to reassure anyone that is worried about the coming winter months that we will continue to support those affected”.
The UK employment rate was 75.3 per cent in the three months to September, with 32.51 million people in employment — 247,000, or 0.8 percentage points, lower than a year earlier and 164,000, or 0.6 percentage points, down on the quarter.
The fall in employment has been especially steep for young people, falling by 174,000 on the quarter among 16-24 year olds to a record low of 3.52m.
Men have also been far harder hit on average than women, with male unemployment estimated at 5.2 per cent in the three months to September, up from 4.1 per cent a year earlier; female unemployment rose from 3.6 per cent to 4.3 per cent.
Economists said job losses were bound to climb further over the next few months, but that the extension of government income support would delay and limit the damage.
Samuel Tombs, at the consultancy Pantheon Macroeconomics, said the chancellor’s change of tack on furlough had “greatly improved the near-term outlook for employment”, especially since hopes of a vaccine might now persuade companies to keep staff on their books over the winter in hopes of a recovery in demand next summer.
Tony Wilson, director of the Institute for Employment Studies, said the headline changes in unemployment and employment were “worrying but not catastrophic”, but the continued dearth of new hiring posed more of a problem.
The number of people starting a new job in the July to September period was even lower than it had been during the spring lockdown, he noted. “Every recovery is built on a rebound in hiring but it didn’t happen in the summer.”
There were some early signs of the labour market starting to pick up in the autumn before the spread of local coronavirus restrictions and the announcement of the second national lockdown.
The ONS said data from HM Revenue & Customs suggested only a slight drop of 33,000 in the number of payroll employees between September and October — although this still took the number on company payrolls to 782,000 below pre-pandemic levels.
The number of vacancies advertised climbed steadily from August to October, with an especially marked pick-up in hiring by small businesses, but it remained almost a third lower than a year ago, even at the end of this period.
Annual growth in employees’ pay was stronger than the previous month — reflecting people returning to work on full pay after a period on furlough. However, it was well below pre-pandemic levels, with annual growth of 1.3 per cent in total pay and 1.9 per cent in regular pay — the gap between the two measures reflecting lower bonuses.