Lockdown damage to UK labour market points to job losses to come

The number of people claiming out of work benefits in the UK climbed to 2.8m in May, while the number of employees on companies’ payrolls fell sharply, according to official figures that suggest redundancies are set to rise as employers prepare for the withdrawal of the government’s coronavirus support.

The Office for National Statistics said the number of people claiming jobseekers allowance and work-related universal credit benefits rose by 528,000 in May; after an upwardly revised jump of just over 1m in April.

Not all of those claiming benefits will be unemployed, but the ONS data contained many other signs of the damage the coronavirus lockdown has done to the UK labour market.

The number of payroll employees was more than 600,000 lower in May than in March, a fall of 2.1 per cent that reflects employers turning to outright redundancies on top of their extensive use of the government’s furlough scheme — which has supported some 8.9m employees.

The figures also showed a record quarter-on-quarter fall of 131,000 in the number of self-employed people in the three months to April and a record fall, of 8.9 per cent, in the number of weekly hours worked over the same period, compared to a year earlier.

Nonetheless, the impact of the coronavirus crisis has not yet showed up in the official headline measures of employment and unemployment; the latter remained barely changed on a quarter-on-quarter basis at 3.9 per cent in the three months to April.

This is because furloughed workers are classed as employed — leading to big falls in average pay and working hours, especially in the sectors where businesses shut down completely during the lockdown, but preventing many immediate job losses.

“Unemployment will leap if even a small fraction of employers never bring back furloughed workers,” said Samuel Tombs, economist at consultancy Pantheon Macroeconomics, noting that a collapse in job vacancies — which fell to a record low of 476,000 in May — pointed to much faster falls in employment ahead.

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