UK’s unemployment rate hits 5% for the first time since 2016

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According to figures released today by the Office for National Statistics (ONS), the UK’s unemployment rate has hit 5% for the first time since 2016, after 202,000 people lost their jobs in the three months to November 2020.

ONS data also revealed that there are 828,000 fewer people were on company payrolls at the end of the year compared to the start of February.

In September to November, the total number of hours worked was 979.9 million a week. This was up 89.0 million hours compared with the previous three months, but still below pre-pandemic levels. During this same time period, job vacancies were up 81,000 on the previous three months, but were also still well below pre-pandemic levels.

After allowing for inflation, both regular and total pay in September to November were 2.8% up on the previous year.

ONS Head of Economic Statistics, Sam Beckett, said: “The latest monthly tax figures show that there were over 800,000 fewer employees on payroll in December than last February. More detailed data, published for the first time, show that parts of London have seen the steepest percentage falls, followed by north-eastern Scotland. In the three months to November, on our survey data, the employment rate fell sharply again, while the unemployment rate rose to hit 5% for the first time in over four years.

“The number of people saying they had been made redundant in the previous three months remains at a record high. Meanwhile vacancies, which were rising in summer and early autumn, have been falling in the last couple of months.”

Industry reaction

Samantha Windett, Director of Policy at Impetus and Co-Chair of the Youth Employment Group said: “The fall in employment for young people since the start of the crisis is larger than any other group. The latest labour market statistics show there are 250,000 fewer 16–24-year-olds in employment than before the start of the pandemic and unemployment levels remain high. Already 2.5 times more likely to work in sectors worst impacted by previous lockdowns, the economic effect on young people has only been exacerbated by the continuing disruptions. It’s clear that young people urgently need support.

“In June, the Prime Minister announced an Opportunity Guarantee for every young person. Amid an ever-worsening youth employment crisis, we need government action to deliver on that promise. No young person should spend more than six months unemployed before accessing a meaningful education, training or employment opportunity. The latest numbers on the Kickstart Scheme show that many employers have had no choice but to delay their placements given the continuing disruption of lockdowns. Kickstart must be extended past December this year to give all employers engaged in the scheme the time they need to fulfil their plans and offer thousands more young people the opportunity of employment.”

Jon Boys, labour market economist for the CIPD, the professional body for HR and people development, comments: “Unemployment has continued its ominous ascent to 5%, but for the moment it’s being kept in check by the furlough scheme. Official forecasts expect it to peak just below 8% but the risks of higher levels of job losses are heightened without a further extension of the furlough scheme to at least the end of June. It’s worth remembering that redundancies are not an easy or cheap option for businesses, costing around £11,000 per individual. Many of these jobs stand to be viable again in just a few months’ time, which is why the CIPD is calling for the furlough scheme to be extended until at least the end of June.This would help to protect viable jobs from a period of temporary disruption while the vaccine is rolled out and buy time for the start of economic recovery. It is also important that the furlough scheme is linked to support for training for workers who are furloughed or working reduced hours. Given the continuing rise in youth unemployment, the Government will need to consider stronger incentives for employers to take on young apprentices aged between 16-24 and to boost the support to employers and marketing of the Kickstart scheme.”

David Morel, CEO, Tiger Recruitment said: “The latest ONS labour market statistics tell a familiar story as the pandemic continues to take its toll on UK jobs, showing a large rise in unemployment in the three months to November and record redundancies. However, more positively, average total pay increased to 3.6%, which tallies with our own figures: 62% of placed candidates saw a rise from their previous salary in Q4, compared to just 27% in Q3. Our data for the rest of the year and early January shows an improving picture and gives grounds for optimism in 2021: in December we saw a 30% rise in the number of temporary roles briefed in to the agency in Q4 2020 versus Q3, coupled with a 3% increase in the number of permanent jobs.

“Buoyed by the promise of the vaccine, many businesses are pushing forward with their hiring plans this year – albeit tentatively. Despite hopes of some return to ‘normality’, employers are still waiting to hear when and how the current lockdown restrictions will be eased. The uncertainty is driving the demand for temporary skills as a way for businesses to access the talent they need without a long-term commitment, while muting new permanent briefs in what is traditionally our busiest time. However, while business is down on this time last year, we are seeing an uplift in business month-on-month since the first lockdown.”

Ian Warwick, Managing Partner at Deepbridge Capital, said: “The UK’s unemployment rate rising to 5% in the three months to November is the first time this has happened in five years. The announcement is reflective of regular negative milestones and a trend we are seeing as the latest lockdown provided yet another setback for business sectors and their workers. The Government has worked hard in an incredibly difficult environment to provide employers with much needed financial support via the furlough system, BBLS and CBILS, as well as long-term support for growth-focused companies via the likes of the Enterprise Investment Scheme, but now we would urge that there needs to be even greater support – both via financial and via sustainable growth initiatives. Employers at agile companies, which have survived 2020 and provide a product or service which has a genuine medium to long term solution to a recognised problem or market need, will continue to develop and grow their businesses but require ongoing capital to do so.

“The types of companies we support, working in the innovative technology and life science sectors, are by their very nature expected to be highly innovative and are therefore generally focussed on addressing long-term market needs. As we witnessed last year, we believe there should continue to be a genuine need for the research, development and/or products such companies are producing. The biggest problem for growing and establishing early-stage companies may be access to funding, but we expect UK investors and financial advisers to continue to utilise the Enterprise Investment Scheme (EIS) to support such great people and companies whilst allowing investors to benefit from the generous potential tax reliefs on offer. EIS has never been a more important Government tool for supporting the UK economy and it has never been more vital for investors to understand the potential benefits.”

Douglas Grant, Director of Conister, part of AIM listed Manx Financial Group, said: “The slight rise in unemployment announced this morning follows the reduction in GDP announced earlier this month. Both the economic contraction and subsequent job losses were to be expected as most of the UK entered a second lockdown, and while the numbers aren’t as severe due to the Chancellor’s interventions they do highlight the dire situation that many businesses are facing. We must now ensure that the financial security of those businesses that are sustainable can flourish in the future. Up until now the government furlough scheme combined with access to credit through the BBLS and CBILS has kept many SMEs alive and acted as an important triage system to identify and support businesses. However, we believe that we have now passed this phase and we must recognise that many businesses will not survive this pandemic, particularly those with an unsustainable debt burden. It is imperative for the future that we now focus on identifying and protecting our most resilient business sectors.”

Paul Naha-Biswas, CEO and Founder at Sixley, the talent recommendations platform said: “Although the vaccination effort continues to gather pace, today’s ONS unemployment statistics are a further reminder that the economic legacy of COVID-19 will be with us long after the pandemic has ended. With the UK in another national lockdown for the foreseeable future, it is possible that – in economic terms – things will get worse before they get better.

“However, as we look to later this year, it is not all doom and gloom. Experts believe that up to 54 million Brits should be vaccinated by early summer, and when we reach this threshold a substantial portion of the economy will open up, and a slight sense of normality should return. In this interim period before widespread immunity, it is imperative that friends and family of those looking for work search across their networks, identify job opportunities, and recommend them for a role. We have never had a job market with such a sizeable crop of experienced, talented candidates – however, this experience also makes it highly competitive. In such a crowded jobs market, a recommendation can make all the difference.”

Jeremy Thomson-Cook, chief economist at Equals Money, says: “Today’s jobs numbers are a tale of halves as we see both record redundancies, and rising job demand. While the furlough scheme will keep the headline unemployment rate fixed around 5% until its expiry, redundancies are expected to increase in retail, hospitality and leisure, and the construction sectors once government support ends. Thankfully, vacancies are also rising with 81,000 new job openings reported in the past three months. This should improve as social distancing becomes less of an infection control priority. In the short term, and together with the latest noises from government as to when lockdown will start to soften, the current expiry of the furlough scheme at the end of April looks premature and we would both urge and expect the Chancellor to allow for a gradual cessation of support through the summer.”

James Reed, chairman of REED, says: “Today’s ONS unemployment statistics support the Chancellor’s November prediction that the ‘economic emergency has only just begun. However, we must all remember how far we’ve come as a nation and know that the UK labour market is recovering against all the odds. Last week, the total number of jobs posted on reed.co.uk was 4% higher than the same period in 2020 – which is particularly impressive considering the pandemic hadn’t started by then.

“Additionally, nearly 100,000 jobs went live on our site during the first two weeks of this lockdown – 10% and 101% higher than the same period in the second and first lockdown respectively. The jobs growth shows that we have adapted successfully to live and work with the virus. Existing sectors such as IT & Telecoms, Education, and Social Care currently have the most job opportunities. However, due to the pandemic, new roles are also emerging. We currently have 895 COVID-19 related and vaccination roles on reed.co.uk, stretching from COVID Marshall to community vaccinator. I urge anyone seeking employment to consider their skillset and apply to help fight against the pandemic. I’m optimistic about the future. With the vaccination programme gathering pace, the economy will begin to reopen and a return to normality could be sooner than expected. Jobseekers are urged to get ready for an easing in lockdown restrictions, and those currently unemployed or furloughed can do so by upskilling or reskilling for the emerging post-pandemic and post-Brexit economy.”

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