UK unemployment rate rises to highest level for almost two years

The unemployment rate in the UK grew to 4.1% in the three months to July, compared with 3.9% previously – the highest levels of people out of work since the end of 2018.

Estimates for the three-month period according to the Office for National Statistics (ONS) showed 1.4 million people out of work, up 104,000 on a year ago and 62,000 more than the prior quarter. Those aged 16 to 24 suffering the biggest drop in employment compared with other age groups with employment dropping by 156,000 in the three months to July.

Early indicators for last month also revealed that the number of employees in the UK on payrolls was down 695,000, compared with March (prior to the lockdown).

Darren Morgan, Director of Economic Statistics at the ONS, commented: “Some effects of the pandemic on the labour market were beginning to unwind in July as parts of the economy reopened. Fewer workers were away on furlough and average hours rose. The number of job vacancies continued to recover into August, too.

“Nonetheless, with the number of employees on the payroll down again in August and both unemployment and redundancies sharply up in July, it is clear that coronavirus is still having a big impact on the world of work.”

Chancellor Rishi Sunak said: “This is a difficult time for many as the pandemic continues to have a profound impact on people’s jobs and livelihoods. That’s why protecting jobs and helping people back into work continues to be my number one priority.”

Industry reaction

Louise Deverell-Smith, founder of Daisy Chain, the online recruitment platform matching parents with flexible job roles.

Louise understands the negative impact the pandemic has had on the job market, but with kids now going back to school, believes the working world will move to a more flexible model with more equal opportunities for everyone.

She said: “This morning’s ONS figures continue to paint a bleak picture of the UK’s jobs market. With this being the first month of data showing the impact of the government scaling back its Job Retention scheme, it’s clear the world of work has and continues to go through a period of great change that was unimaginable at the start of 2020.

“Businesses and workers have had to be incredibly creative and resilient during this period. The move to flexible working arrangements and working from home has allowed many businesses to survive and many workers remain in employment. As we move into the autumn, flexible working and working from home arrangements are continuing to cement themselves as the norm throughout the UK and will be crucial to maintaining the recent economic recovery. As a result, Daisy Chain has seen a 40% year-on-year increase in employers signing up to offer such roles.

“With children returning to the classroom, this will have an additional effect on the UK labour market. It’s vital businesses continue to open their doors to working parents who remain an important part of our workforce but who have been among the hardest hit by the pandemic. Offering flexibility and government support will enable many workers, especially those with children, to keep their jobs or return to employment. The jobs market is continuing to change throughout the UK and it’s the businesses that react and adapt to these changes that will succeed.”

Jeremy Thomson-Cook, Chief Economist at Equals said: “Unemployment statistics don’t have the diagnostic powers they used to given the furlough scheme’s ability to put many workers and their jobs in state of suspended animation. It is the ending of the furlough scheme that represents a true reckoning for the UK labour force; for now the knowledge that the claimant count of benefits such as Universal Credit continues to increase and earnings are falling on average sets up our belief that a consumer-led recovery remains unlikely.”

“Similarly, while GDP statistics in the coming weeks will show the technical recession will be over, the reality of lower wages and uncertain employment for most of the UK remains.”

James Reed, Chairman of REED, said: “In May, I predicted the UK was facing a tsunami of job losses when the furlough scheme ends, and today’s ONS figures suggest the wave is set to crash through the economy this autumn.

“Although these statistics will cause concern, now is not the time to panic and extend the furlough scheme. It’s time for the country to move on. Businesses need to level with their furloughed staff about their future as soon as they are able to. People are facing uncertainty over whether their jobs will exist once the furlough scheme winds down, and are in need of assurances either way. They must be allowed to move on, learn new skills, and begin searching for a new employer.

“The good news is that job opportunities are remerging. Over 128,000 new jobs were added onto in August – a 7.5% month-on-month increase – and opportunities increased in nearly all the sectors featured on the site.

“Business leaders should also remember that this is a fantastic time to hire. There is an abundance of talent available, with many being able to start immediately. Despite these uncertain times, some businesses will see an opportunity to invest in people and take advantage of this situation.  The forward thinking can hire talent that would not normally be available.”

Robert Alster, CIO at investment management firm Close Brothers Asset Management, comments:“The UK’s employment data is beginning to reflect the realities of a post-Covid economic landscape. Recent jobs drives by the likes of Amazon and Tesco have offered rays of light, but The Institute of Employment Studies (IES) estimates that planned redundancies for this autumn are likely to be more than twice the height of the last recession. Self-employed workers, 18-24s, and those in the still struggling retail and hospitality sectors are of particular concern, and must be front of the Chancellor’s mind when he looks to set out the next part of his support and recovery strategy.

“Crunch time will come in the next twelve weeks, as lockdown restrictions are tightened and the furlough scheme comes to an end. And as the Brexit process ramps up, the scale of the economic challenge facing the UK remains in the balance. Despite the relative success of the Government’s policies so far, a stormy Q4 could blow the recovery onto the rocks.”

Matthew Percival, CBI Director of People and Skills, said: “The easing of lockdown restrictions and a more flexible Job Retention Scheme in July have led to the beginning of a recovery in vacancies and hours worked. But rising redundancies, rising unemployment and a record fall in the number of young people in work are clear warning signs of what is to come. Looking ahead, a successor to the Job Retention Scheme is needed to protect jobs and businesses.”

Lee Biggins, CEO of CV Library, comments:“The UK employment rate is hanging by a thread and will continue to do so until the government’s Job Retention Scheme comes to an end. Sadly, today’s figures bring to light how many people have been impacted by the pandemic, and just how many jobs have been lost.

“There is hope, given that more people are returning to work after furlough and vacancies are picking back up. However, job numbers are nowhere near the levels they were at this time a year ago. With a second spike on the horizon, the outlook for the UK job market is unfortunately pretty bleak.”