UK employers have slashed more than 600,000 staff jobs since March as the coronavirus becomes an “employment crisis,” new figures suggest.
Office for National Statistics (ONS) figures on Tuesday showed the number of employees on UK payrolls in May was down by 2.1% compared with March.
The claimant count, including both the unemployed and workers employed but with low earnings, hit 2.8 million in May. Vacancy numbers to a record low of around 476,000 between March and May, down 60% on two months earlier, while average pay has also dropped at a record rate.
The official employment rate was only available for the three months to April. It showed employment at 76.4%, down only 0.1 percentage point on the previous quarter but still 0.3 percentage points up on a year earlier.
The unemployment rate for the same period was estimated at 3.9%, largely unchanged on the previous quarter and still at historic lows despite including part of the coronavirus lockdown. Economists polled by Reuters had mostly expected a rise to 4.7%.
The government’s coronavirus job retention scheme is widely seen to have halted a much steeper rise in the official unemployment figures so far. 8.9 million workers are not currently working but remain on their employers’ books, with 80% of their wages paid by the UK government to protect their jobs.
“Today’s figures are starting to show the impact of Covid-19 on our economy,” said employment minister Mims Davies. But she said the furlough scheme as well as loans, grants and tax cuts for business had protected jobs.
The latest figures suggest furloughing has sent pay growth in recent years into reverse however, as well as sparking steep drops in average hours worked. Average pay dropped in the three months to April in real terms, taking inflation into account. It marks the first time the value of earnings has dropped since January 2018.
Many also fear that weak economic recovery and a tapering off of government support will eventually see lay-offs spike. Some believe redundancies will edge higher from this week, as employers need to give workers notice ahead of changes to the scheme that will force them to contribute more to workers’ costs from August.
“The furlough scheme continues to hold off the bulk of job losses, but unemployment is likely to surge in the months ahead,” said Tej Parikh, chief economist at the Institute of Directors. “Wage support has given firms some much-needed time to regroup.”
He said many firms had rapidly reshaped their operations in the wake of COVID-19, but warned social distancing would “inevitably” keep trade subdued and hit jobs, pay and recruitment.
James Reed, chair of recruitment firm Reed, said: “What was sadly a health emergency is now rapidly becoming an employment crisis. Millions of jobs are now at risk and what we’re seeing may just be the tip of the iceberg.
“There’s a real danger that unemployment could go above 15%, and as the clock continues to tick on the government’s generous job retention scheme, jobseekers and businesses face an unforgiving employment landscape.”
Michael Hewson, chief analyst at CMC Markets, said the furlough scheme appeared to be “skewing” the figures, predicting a clearer picture may only emerge in the autumn.