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Jobs Support Needed Until June says CBI: Employment Data Reactions

UK labour market

Image © Adobe Images

The UK Government has been urged to maintain its employment support schemes until at least June after data showed that the UK's economy shed yet more jobs in the final part of 2020.

The ONS says that in the period from October to December 2020 an estimated 1.74 million people were unemployed, up 454,000 on the same period the previous year and up 121,000 on the quarter.

The annual increase was the largest since September to November 2009, with unemployment at its highest level since July to September 2015.

The data comes a day after the UK government unveiled a roadmap to exit lockdown and reopen the economy by June 21.

The ONS estimates the UK unemployment rate was at 5.1% in December, 1.3 percentage points higher than a year earlier and 0.4 percentage points higher than the previous quarter. The figure was in line with analyst expectations.

"The Job Retention Scheme continues to support people in work and limit the impact of Coronavirus on the labour market. Employers will now be looking to the Chancellor to extend furlough, securing people’s jobs and livelihoods," says Matthew Percival, CBI Director of People and Skills.

The latest labour market data comes just days before the March budget that is expected to see Chancellor Rishi Sunak extend the furlough scheme that sees the government compensate employers to keep employees in their roles until the economy reopens fully.

While the jobs market deteriorates, those with jobs have seen their compensation increase. The ONS reports UK average earnings, with a bonus included rose 4.7% in December, ahead of expectations for an increase of 4.1% and a rise on the November level of 3.7%.

However, the rise in wages is not as encouraging as the headline might suggest. "This is largely because the proportion of people on lower earnings has been falling so underlying earnings growth isn’t as strong as it looks," says Thomas Pugh, UK Economist at Capital Economics.

The Claimant Count for January - which offers the most up-to-date snapshot in the employment dataset - continues to rise, understandably given unemployment is rising, with the level increasing by 109.4% since March 2020.

However, in January the count actually fell by 20K:

Claimant Count

The Claimant Count seeks to measure the number of people claiming benefit principally for the reason of being unemployed.

"Things might have been a little better in January, as claims fell by 20,000," says Pugh.

HMRC PAYE employment data meanwhile showed that employment rose for the second month in a row, by 83,000 in January.

The redundancy rate increased by 8.4 per thousand on the year to 12.3 per thousand, according to the ONS, although again the situation appears to have stabilised more recently:

Reundancies

Above: UK redundancy rate, people aged 16 years and over (not seasonally adjusted), between October to December 2005 and October to December 2020. Image courtesy of the ONS.

"The Prime Minister’s roadmap offers optimism that the country can get back to business in the coming months. But with tough decisions on jobs being taken daily, employers need the Budget to provide further business support until the economy is fully reopen," says Percival.

The CBI are calling on the government to announce VAT deferrals and a business rates holiday that will last until June, which would provide immediate relief to those sectors who are struggling and preparing for restrictions to ease over time.

Capital Economics say a rapid rebound in GDP in the second half of this year should prevent the unemployment rate from reaching levels seen following the 2008 financial crisis of 8.4%.

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