Unemployment drops but questions remain over ‘real’ rate
The figures cover the December to February period, and are down by 0.1 percentage points from the previous quarter, though remain 0.9 percentage points higher than this point last year.
While unemployment fell, so too did employment. The ONS calculated that the employment rate came to 75.1%, 0.1 percentage points lower than the previous quarter. This is explained by an increase in the number of people classed as being economically inactive.
According to the ONS, the total number of weekly hours worked came to 959.9 million, down 20.1 million hours from the previous quarter, while the redundancy rate dropped from the record high of 14.2 people per thousand employees registered in the last quarter, to 7.3 people per thousand employees.
A fragile labour market
Jack Kennedy, UK economist at job site Indeed, said that with unemployment having dropped for two reports in a row, the jobs market is beating all expectations, for now at least.
However, he warned this could be a false dawn, with the number of people stepping out of the labour market entirely to become economically inactive “creeping steadily upwards” while the employment rate is sliding.
Kennedy continued: “The overall picture is of a fragile labour market, which with the help of the furlough scheme has withstood the shutdown of large parts of the economy remarkably well. But it’s still a case of survival rather than strength.”
Unemployment is being ‘artificially suppressed’
Paul Craig, portfolio manager at Quilter Investors, said that the data is “somewhat stale” as it covers a period when the last lockdown was still in full swing. He added that the “unemployment rate remains artificially suppressed by furlough and there are fears that ‘real’ unemployment could easily be more than double what the stats tell us”.
However, he pointed to the fact that job adverts are returning to pre-pandemic levels, and suggested that the UK is “approaching somewhat of a sweet spot with the successful vaccine rollout allowing the economic reopening, and this is coinciding at a time when the stimulus taps remain turned on, giving people hope that better times are right around the corner”.
Giving up and letting go
Sarah Coles, personal finance analyst at Hargreaves Lansdown, pointed to early payroll data for March which suggested that 56,000 jobs had disappeared, and suggested this was the result of firms taking stock of the planned end to government support and accepting it was time to close.
She continued: “The blow is particularly harsh for young people, who made up more than half of these losses. This is a function of the concentration of younger workers in hotels and restaurants that have been knocked sideways by the pandemic.
“However, this will come as no comfort at all to them. Job losses at this stage in life, with alternatives so thin on the ground, can make it particularly difficult for those with little experience to get back into the workplace.”