London: UK jobless claims fell in June and the economy lost fewer jobs than expected in the three months through May as government income support kept millions of people in work amid the coronavirus lockdown.
The number of people seeking unemployment benefits fell 28,100 following huge gains over the previous two months, and employment fell by less than half the expected drop, the Office for National Statistics said. The headline jobless rate unexpectedly stayed at 3.9 per cent.
The job cuts to date are almost certainly the tip of the iceberg, however. With more than 9 million employees being kept in work on government wage subsidies, the question is what happens to them when income support is phased out between August and October.
A temporary stay
A British Chamber of Commerce survey Thursday found that one third of businesses expect to cut jobs in the next three months. It follows a warning from the Office for Budget Responsibility that the jobless rate could reach 12 per cent by year-end if just one in seven furloughed workers becomes unemployed, and over 13 per cent in early 2021 under a more pessimistic scenario.
The prospect of an unprecedented 4 million people out of work - triple the current total - is increasing pressure on Chancellor of the Exchequer Rishi Sunak to add to the 30 billion pound ($38 billion) stimulus package he announced last week as the economy struggles to emerge from its deepest recessions in centuries. While the measures may mitigate the blow, Britain is nonetheless facing jobless rates last seen in the early 1980s.
Unemployment was held down in part because the shutdown of the economy meant many of those who lost jobs were unable to search for work. Employment fell 126,000 in the latest three months, but many of those not working declared themselves inactive rather than unemployed.
Warning signs are mounting, meanwhile. Early estimates based on tax records show 74,000 fewer people were in paid employment than in May, and 649,000 fewer than in March when the lockdown began.
The number of hours worked plunged by almost 17 per cent between March and May, while vacancies dropped by 463,000 in the three months through June. Regular pay growth came to a virtual standstill, and wages were lower than a year earlier when bonuses are included.
The challenge confronting the government and the Bank of England was hammered home by figures this week showing the economy barely grew in May after shrinking a staggering 26 per cent over the previous two months.