The U.K. labor market deteriorated further, according to the latest monthly ONS report. In the three months to September, the level of employment dropped 164k in the third quarter, driven by a record quarterly rise in redundancies, while the number of people unemployed overall, rose by a larger 243k in the same period. This signified that the jobless rate rose to 4.8 percent in the third quarter, after rising to 4.5 percent recorded in last month’s report.
These figures capture trends in the labor market that pre-date last week’s announcement by the Chancellor to extend the furlough scheme out to the end of March and therefore give some insight into how firms reacted to the prospect of the ‘initial’ job retention scheme unwinding. From September, government support under the scheme was scaled back from 80 percent to 70 percent, with firms required to contribute 10 percent to the salaries of furloughed workers. ONS BICS data implies that the number of people on the scheme dropped by 600,000 in September, which benchmarked against the one month fall in employment, roughly implies that around 10 percent of these people lost their jobs, noted Lloyds Bank in a research report.
“With somewhere between 1.0–1.5mn or so additional people still ‘temporarily away from their paid work’ since early March, and recent lockdown measures likely to weigh further on firms’ demand for labour, the UK labour market is likely to see a further deterioration in the coming months. The Bank of England expects most furloughed staff to return to employment, but it nevertheless sees the unemployment rate rising to around 7.75 percent by around the middle of next – a view supported by the latest vacancies data which shows that the number of unfilled jobs has fallen by almost 35 percent in the past year, consistent with weak demand for labour”, added Lloyds Bank.