The latest UK data offers hope that, after turbulent autumn, the job market will stabilise towards the end of 2020. Unemployment rose ahead of the originally planned end date for the furlough scheme through September and October. While the policy was eventually extended, in September, redundancies rose and peaked as firms cut their workforce in anticipation of lower-wage subsidies. According to the new weekly data, that translated into an increase in the unemployment rate to between 5-5.5 percent at the end of October/start of November. That is up from just under 4% prior to the pandemic.
The better news is that real-time payroll information tentatively indicates that, after consistent month-on-month falls, employment has since stabilised. While businesses are reporting financial difficulties in the hardest-hit sectors, the extended furlough scheme seems to have so far succeeded in limiting job losses. The scheme, however, is presently due to expire in April. The question is whether the policy will be further extended, given that aspects of the current lockdown are likely to last longer, or whether the government will return to offering subsidies only if part-time employees are reinstated.
If support is reduced before the hardest hit sectors are allowed to open up, the risk is that we will see a further increase in unemployment. The fact that over a million workers were still ‘fully furloughed’ back in October when the scheme was originally scheduled to end, shows that due to the ongoing restrictions, there is a large pool of workers who have not been able to work at all. The disruption resulting from the new UK-EU deal will also inevitably put pressure on jobs as companies continue to grapple with constant cost increases and barriers to trade. Although there is a lot of confusion, it’s not inconceivable that the unemployment rate could reach the region of 6-7 percent later this year.