Unemployment rate up for first time since 2012
The unemployment rate for the three months to January 2020 was slightly up compared to a year earlier. But given the unprecedented coronavirus situation, the figure is likely to drastically change in the coming months.
The Office for National Statistics (ONS) estimated 1.34 million people were unemployed between November and January – 5,000 more than a year earlier.
This represents the first annual increase in unemployment since May to July 2012.
The unemployment rate was 3.9%, largely unchanged compared with a year earlier and 0.2 percentage points higher than the previous quarter.
However, the employment rate in the three months to January 2020 remained at its joint highest level of 76.5%, 0.4 percentage points higher than a year earlier, and 0.3 percentage points up on the previous quarter.
As such, a record 32.99 million people aged 16 and over are in work – 184,000 more than in the previous quarter and 271,000 more than a year earlier.
The ONS said the increase was mainly due to more people in full-time employment and more women in employment, while there has been a large decrease of part-time employment – down 127,000 on the year to 6.91 million.
Turning to wage growth, the ONS said pay continued to grow faster than inflation, but its rate of growth has slowed since mid-2019.
Estimated annual growth in average weekly earnings for employees in Great Britain in the three months to January 2020 was 3.1% for both total pay (including bonuses) and regular pay (excluding bonuses).
After adjusting for inflation, annual growth in both total pay and regular pay is estimated to be 1.5%, down from a recent peak of 2% in the three months to June 2019.
The ONS said in real terms, regular pay was £471 a week before tax and other deductions which is £2 (0.4%) lower than the pre-2008 downturn peak of £473 a week for March 2008.
However, total pay in real terms is still 3.6% (£503 a week) below its February 2008 peak (£522).
Sharp rise in unemployment expected
Thomas Pugh, UK economist at Capital Economics, said: “The widespread shutdown of many businesses over the next few months will almost certainly lead to a sharp rise in unemployment and an even larger drop in the number of hours worked. And even if the economy bounces back quickly in Q3, the lag between the economy and the labour market means the unemployment rate may stay elevated until the end of the year.”
Ed Monk, associate director for personal investing at Fidelity International, said: “Any economic data right now comes with a huge asterisk. The coronavirus shock will alter all facets of the economy in a fundamental way from this month onwards so backward looking data is only of limited value.”
He added: “Employment was healthy headed into 2020 but clearly an expected severe downturn from here has the potential to feed through to jobs losses. Amid an incredibly uncertain and fast-moving situation, one thing that is clear is that households will be markedly more cautious in their spending over the coming months.
“At this stage we cannot predict exactly how the economic impact of coronavirus will affect wage growth itself – and different areas of the workforce will experience this differently – but most people will shift to a more defensive financial position, regardless of this. Most will be assessing their savings and investments, rather than looking to increase their outgoings.”