More than 1.7 million unemployed but wages up
An estimated 1.72 million people were unemployed in the three months to November 2020 but average pay rose 3.6% in the quarter.
The UK unemployment rate hit 5% between September and November 2020, 1.2 percentage points higher than a year earlier and 0.6 percentage points higher than the previous quarter.
As such, for the quarter, the Office for National Statistics (ONS) estimated 1.72 million people were unemployed which is 418,000 up on the same period a year earlier and an increase of 202,000 compared to the previous three months.
The redundancy rate has also reached a record high of 14.2 per thousand (395,000), though the ONS noted that it has dropped from the peak in September.
Since February 2020, the number of payroll employees has fallen by 828,000, however, larger falls were seen at the start of the coronavirus pandemic.
Meanwhile, the UK employment rate in the quarter was estimated at 75.2%, 1.1 percentage points lower than a year earlier and 0.4 percentage points lower than the previous quarter. This takes employment estimates to 32.50 million people which is 398,000 fewer than a year earlier. The ONS said this was the largest annual decrease since December 2009 to February 2010.
Turning to wage growth, average total pay (including bonuses) among employees for the three months to November actually increased to 3.6%, and growth in regular pay (excluding bonuses) also increased to 3.6%.
But the ONS said it relates to the fall in the number and proportion of lower-paid employee jobs. It stated: “Current average pay growth rates are being impacted upwards by a fall in the number and proportion of lower-paid jobs compared with before the coronavirus pandemic; it is estimated that underlying wage growth – if the effect of this change in profile of jobs is removed – is likely to be under 2%.”
Elsewhere, the claimant count reached 2.6 million in December, while there were an estimated 578,000 vacancies in the UK in the three months to December, 224,000 fewer than a year ago and 81,000 more than the previous quarter.
‘More job losses are in the post’
Laith Khalaf, financial analyst at AJ Bell, said: “Unemployment hit 5% at the back end of last year and unfortunately the renewed lockdown means even more job losses are in the post. The unemployment rate was expected to peak this summer, at somewhere around 7.5%, but a lengthening lockdown will have economists tearing up their predictions, and pushing them back, and up.
“Even the strong wage growth recorded in the latest data isn’t cause for celebration, seeing as it derives from the loss of lower paid jobs in the economy. While the headline figure is 3.6%, the ONS estimates that without the lift from lower income job losses, underlying wage growth is likely to be under 2%. That compares to over 3% in the previous year.”
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said that the impact of the pandemic has been brutal, despite government support.
“The employment rate saw its biggest annual drop in over ten years – with employment down 398,000 in a year. This was driven by self-employed people throwing in the towel (down 71,000 to 3.12 million) and part-time workers (down 182,000 to 6.56 million).
“And while furlough will keep some employers from having to make difficult decisions about jobs, the longer this goes on, the more risk there is that other costs will push them over the edge. When employers go to the wall, there’s no protection for their employees, so there’s every chance we’re set for more job losses in 2021.”
Coles added that the only tiny silver lining for those still in work, is that pay is rising much faster than inflation – up 3.6% before inflation and 2.8% after it.
“It means that those who are still working have an opportunity to build a savings safety net, to help protect them from whatever 2021 throws at them,” she said.