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26 Jan 2021 | 07:05

UK unemployment rate hits four-year high of 5%

(Sharecast News) - The UK unemployment rate has reached 5.0%, the highest in more than four years, official data showed on Tuesday. According to the Office for National Statistics, the unemployment rate in the three months to November 2020 was estimated at 5.0%. That was 1.2 percentage points higher year-on-year and 0.6 percentage points up on the previous quarter. A total of 17.2m were out of work.

The unemployment rate, which does not include furloughed workers, was marginally below consensus for 5.1%, however.

The ONS said that single-month and weekly estimates for the unemployment rate suggested the rate increased throughout September and October, but was "fairly flat" in November.

The redundancy rate reached a record high, however, of 14.2 per 1,000, and early estimates for December indicated that the number of payrolled employees fell by 2.7% compared to the same month a year earlier.

Sam Beckett, head of economic statistics at the ONS, said: "In the three months to November, the employment rate fell sharply again, while the unemployment rate rose to hit 5% for the first time in over four years.

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

Beckett told the BBC that hospitality had been hit hardest, with the sector accounting for over 40% of total payroll jobs lost.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The labour market is no longer deteriorating, with employment falling in November at the slowest [quarter-on-quarter] pace since March. For now, the Coronavirus Job Retention Scheme is providing struggling firms with a costless way of temporarily not paying staff but preserving the option to employ them in the future.

"Survey measures of near-term employment intentions point to only modest job losses over the winter. Nonetheless, the scheme is due to be wound up, and additional measures to support employment that will be announced in the Budget on 3 March probably will not be anywhere near as generous for firms. It remains likely therefore that the unemployment rate will jump in the second quarter, probably to about 6%."

Around 4.5m workers are currently on furlough. The scheme is due to come to an end on 30 April 2020.

Jack Kennedy, UK economist at online recruiter Indeed, said: "Reopening in December supported a gain of 52,000 payroll jobs, but the return to national lockdown at the start of 2021 has applied the brakes once more as lockdown bites into employers' willingness to hire. Indeed's real-time data shows that new job postings have been trending down for two weeks in a row.

"Today, vacancies are down 38% compared to the same time last year as the effects of lockdown 3.0 ripple through the labour market and the pull the rug from beneath what had been a slowly improving jobs outlook."

Tej Parikh, chief economist at the Institute of Directors, said: "It is now crucial that the Job Retention Scheme and other Covid-19 economic support is extended beyond the spring to support employment as restrictions continue. The latest lockdown will have only added further pressure on firms with troubled balance sheets, which means more jobs are likely to lost in the coming months.

"The forthcoming Budget is a vital moment to help firms retain, retrain and rehire workers as the vaccine rolls out. The government should provide a relief for employers' National Insurance contributions and support reskilling opportunities to shore up the recovery."
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