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Financial News: UK Unemployment Rate Rises As Govt Scales Back

UK Unemployment Rate Rises As Govt Scales Back Furlough Scheme

11/10/2020 - 06:11:00 (RTTNews)

(RTTNews) - The UK unemployment rate increased notably in the third quarter and redundancies reached a record high as firms reduced staffing after the government scaled back the furlough scheme, which was extended this month till March-end next year.

Data from the Office for National Statistics showed that the ILO jobless rate rose by 0.7 percentage points from the previous quarter to 4.8 percent in the three months to September. This was the highest since November 2016 and came in line with expectations.

The number of unemployed advanced by 243,000 persons from the prior quarter to 318,000.

Meanwhile, the employment rate dropped 0.6 percentage points from the preceding quarter to 75.3 percent.

The increase in unemployment suggests that the previous scaling back of the furlough scheme took its toll, Ruth Gregory, an economist at Capital Economics, said.

Unless a vaccine significantly improves the outlook for activity, employment is likely to fall by a total 6.0 percent, or 2 million, and the unemployment rate will rise to a peak of 9 percent next year, the economist noted.

The Bank of England estimated that about 5.5 million employees would be furloughed in November.

Earlier this month, Chancellor Rishi Sunak extended the furlough scheme until the end of March with employees receiving 80 percent of their current salary for hours not worked.

The employment rate has been decreasing since the start of the coronavirus pandemic, while the unemployment rate is rising sharply. The number of people temporarily away from work has fallen since its peak in April and May this year.

Redundancies increased by 181,000 from the previous quarter to a record high 314,000.

Data showed that vacancies continued to recover in the latest period but were still below the levels seen before the impact of the coronavirus pandemic. Vacancies grew by 146,000 from the last quarter.

Average earnings including bonus increased 1.3 percent annually, faster than the expected increase of 1 percent. Likewise, earnings excluding bonus grew 1.9 percent annually versus forecast of 1.5 percent.

In October, the claimant count declined 29,800 from the previous month. The rate dropped to 7.3 percent from 7.4 percent in September.

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