UK employers start hiring again as economy reopens

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UK employers began hiring again in March as they looked forward to the reopening of the economy, according to official figures that will bolster hopes the labour market is on the mend.

The Office for National Statistics said the jobs market had been broadly stable over the past few months of lockdown. The unemployment rate averaged 4.9 per cent over the three months to February, edging down from 5 per cent the previous month. The rate of redundancies was much lower than in the autumn, before the extension of the government’s furlough scheme.

However, the employment rate in the three months to February was slightly lower than the previous quarter, at 75.1 per cent; the inactivity rate for men rose to its highest since 2011; and real-time data collected by HM Revenue & Customs pointed to a month-on-month fall of about 56,000, or 0.2 per cent, in the number of payrolled employees in March — the first fall after several months of recovery.

The most promising sign of recovery was a tentative pick-up in hiring over the past few weeks. The ONS said that vacancies increased by 16 per cent month on month in March, although hiring had slowed in the period before that during the lockdown.

“While the labour market continues to battle with the pandemic, there are signs it is turning a corner,” said Tej Parikh, chief economist at the Institute of Directors. He said he expected unemployment to rise over 2021, as companies attend to weak balance sheets and government wage subsidies end, but said there would also be “significant growth in new positions”, barring a return to tighter restrictions.

Samuel Tombs, chief UK economist at the consultancy Pantheon Macroeconomics, said the unemployment rate could fall further in the near term, despite the phasing out of furlough, arguing that the labour market had relatively little “hidden slack”. Immigration had been impeded by the virus, while levels of underemployment and unwanted inactivity were lower than after the 2008 downturn, he noted.

Mims Davies, minister for employment, said: “Another drop in unemployment, vacancies on the rise and over half a million people joining payrolls in the last month is welcome news as we continue on our road map to recovery.”

However, others cautioned that a much stronger recovery was needed to return the labour market to its pre-pandemic health.

“The UK currently has a Covid employment gap of 6.2m people who need to get back to work,” said Nye Cominetti, of the Resolution Foundation think-tank, pointing to an ONS estimate that 4.7m employees remained furloughed in March, while payroll employment was 827,000 lower than before the pandemic and self-employment down by 600,000.

“Unless this gap is closed before the furlough scheme ends in September, we are likely to see a worrying rise in unemployment later this year,” he said.

The HMRC payroll figures showed young people had again suffered most from the closure of non-essential businesses over the past few months.

“Youth long-term unemployment has hit a five-year high this morning, while youth employment is still falling even as it starts to rise, said Tony Wilson, director of the Institute for Employment Studies. “If we don’t act quickly . . . we are risking another lost generation.”

“It’s clear that young people need long-term support,” said Eleanor Harris, chief executive of the youth charity Impetus, calling for the government to commit to extending its Kickstart youth employment scheme beyond December, because many placements were delayed by lockdown.

Ben Harrison, director of the Work Foundation, a think-tank, said the government needed to do more for school leavers, in particular by helping those who undertook apprenticeships or vocational training to find secure jobs afterwards.

The concentration of job losses among young and lower paid workers has skewed the ONS’s measures of growth in earnings.

The ONS said underlying annual wage growth for both total and regular pay stood at about 2.5 per cent in the three months to February, after adjusting for the drop in the number and proportion of lower paid jobs.

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