UK unemployment rate falls in latest quarterly results

Despite furlough coming to an end, the Office for National Statistics (ONS) announced that the UK unemployment rate was estimated at 4.3% in its latest quarterly results, 0.3 percentage points higher than before the pandemic, but 0.5 percentage points lower than the previous quarter.

That’s down from 4.5% a month ago, as firms continue to recruit as they recover from the economic shock of Covid-19.

The Office for National Statistics (ONS) also said the number of employees on company payrolls jumped by 160,000 between September and October to 29.3 million – “well above” levels seen before the pandemic struck.

The number of people in work also rose, by around 247,000 to 32.523m, lifting the employment rate to 75.4%.

However, vacancies at UK companies hit a record level in August to October, rising to 1,172,000. That’s an increase of 388,000 from the pre-coronavirus (COVID-19) pandemic January to March 2020 level, with 15 of the 18 industry sectors showing record highs.

The redundancy rate also increased slightly in the three months to September, for the second month running. The rate rose by 0.2 per thousand on the quarter to 3.7 per thousand employees, but the ONS says these were similar to pre-pandemic levels.

The ONS reports that total pay grew by 5.8% per year in July-September, down from 7.2% a month earlier.

Regular pay, excluding bonuses, rose by 4.9%, down from 6.0% in June-August.

The average total pay growth for the private sector was 6.6% in July to September, sharply ahead of the public sector where it was 2.4%.

However, the ONS estimates that underlying regular pay growth could be as low as 3.4%, but says that this should be interpreted with caution given the uncertainty.

The UK economic inactivity rate was also estimated at 21.1%, 0.9 percentage points higher than before the pandemic, but largely unchanged on the quarter.

As a result of the job announcements, Sterling has gained almost half a cent to $1.346, its highest level in nearly a week.

Industry Reaction

Susannah Streeter, Senior investment and Markets Analyst, Hargreaves Lansdown: ‘’The latest unemployment figures are another layer in the economic jam sandwich, indicating that higher prices may prove a lot stickier than first thought.

“Fears that a big chunk of furloughed staff would lose their positions led to the Bank of England holding off an interest rate rise at the last meeting.

“But the jobs queues are getting shorter, as the big fight for staff continues, with the unemployment rate coming in at 4.3%, a notch lower than forecast.

“The governor of the Bank of England Andrew Bailey says he’s uneasy about rising inflation and the jobs figures are another indicator that there could be a fresh sugar rush of higher wages. Already starting salaries this Autumn are at their highest rate in 24 years but Mr Bailey still appears steadfast in this view that sweeteners for staff will be temporary and that we won’t be returning to the wage spiral of the 1970s.

“But the layers are building up for a sustained increase in prices in the medium term. The supply chain crisis has already spread across the globe, pushing up costs for companies and showing little sign of easing just yet.

“The pandemic bounce back has buttered up demand for goods, and now potential has grown for higher wages to congeal. The official Labour Force Survey won’t be released until the 16th of December but if the jam sandwich of sticky prices shows little sign of easing, it looks increasingly likely the Bank will raise rates at its meeting two days later.’’

Thomas Pugh, economist at RSM UK, believes the latest job figures could increase the likelihood of interest rates rising in December. He said: “The labour market appears to have escaped the end of the furlough scheme relatively unharmed. If the official data for October tells a similar story, which we think it will, then a major obstacle preventing the Monetary Policy Committee (MPC) from raising interest rates in December will have been removed.

‘The 160,000 rise in payrolls for October, also released today, suggests that the winding down of the furlough scheme didn’t lead to a surge in unemployment last month. Indeed, the claimant count rate fell from 5.2% in September to 5.1% in October.

“What’s more, total vacancies continued to rise to another record of 1,172,000. And there was evidence that the issue is becoming more widespread throughout the economy with 15 of the 18 industry sectors showing record highs. Both single month vacancies and Adzuna’s online job advert estimates reached record levels of vacancy numbers in October, suggesting that the end of the furlough scheme hasn’t helped to ease labour shortages.

“This isn’t official data, so the MPC will want more evidence to be sure that the labour market is recovering. But the official data for September indicates that the labour market recovery was robust. Indeed, the fall in the unemployment rate from 4.5% in August to 4.3% in September was driven by a 247,000 rise in employment.

“At the same time, headline pay growth fell from 7.2% 3myy in August to 5.8% in September. Pay growth is still being heavily distorted by the pandemic, but we think that underlying pay growth is probably around 4 – 5%, above its pre-pandemic level of about 3%.

“The continued robust recovery in the labour market will reassure those MPC members who were concerned about damage from the ending of the furlough scheme. Admittedly, there will probably be a small rise in the official measure of unemployment in October, but most MPC members will probably decide that the labour market is now robust enough to withstand an interest rate hike.

“Today’s data very much leaves the door open for a rate hike in December, but given the slowing economic recovery, it will probably be a tight vote.”

Commenting on the record-high vacancy rates amid the ongoing worker shortage, Mickaël Cabrol, Managing Director, EMEA at global HR-tech company iCIMS, says: “Talent teams are faced with fierce competition for talent in light of the pandemic and significant restructuring and redistribution of labour. To build and attract winning teams, it is crucial to build strong virtual connections with talent and to prioritise both the candidate and employee experience.

“How a company treats its candidates could be an indication of how employees are being treated, and job seekers are taking note. A modern, seamless recruitment experience is really important.

“No matter how desirable an organisation is, candidates may give up if the process is too long, complicated, or tedious.

“If you don’t want top talent to ghost you, don’t ghost them during the hiring process! Confirming that an application was received and providing personalised feedback is an easy way to give a great recruiting experience. This is arguably one of the most frustrating things for applicants: a lack of follow-up once they apply for a job.

“Applying for a job is a sign of interest that should not be overlooked. By not responding or offering updates, organisations risk losing quality candidates, many of whom assume they’ve been rejected.”

Responding to the latest ONS labour market data, Nick Bowes, Chief Executive of Centre for London said:
“With the highest unemployment rate and the only region with fewer payrolled employees now than at the start of the pandemic, London’s recovery continues to lag behind the rest of the country.

“With so much of the levelling up agenda focused on areas outside of London, today’s data is a stark reminder that the city’s economy can’t be relied on to just bounce back under its own steam and that London has large levelling up challenges of its own.

“Government must not turn its back on the city. We need a much more joined-up approach that recognises the need to invest in skills, education, early years, housing and health.”

Niki Turner-Harding, Senior Vice President at Adecco UK & Ireland provides insights into today’s candidate-led environment in the context of record job vacancies and worker shortages. She commented: “The candidate-led jobs market is continuing to thrive – that much is clear from yet another month of increased employment.

“The number of employees on the payroll now far exceeds pre-pandemic levels, demonstrating the continued recovery of the market from the impact of coronavirus.

“This increase is significant given the continued rise in job vacancies, which has reached a new record of almost 1.2 million in August to October. Not only does it indicate a fierce competition for talent, but it also meets employee expectations of the job market’s recovery: recent research from the Adecco Group found that well over half (61%) of UK office workers expected companies to hire in significant numbers within the next year.

“Companies looking to meet their workforce requirements are continuing to invest in their employee value proposition, to stand out against the competition.

“As demand continues to outstrip worker availability, businesses will need to take a hard look at the initiatives that matter most to current and prospective talent. Investment in flexible working, staff wellbeing, and career development opportunities will not go unappreciated.”