UK unemployment rate hits highest level since 2016

Tom Belger
·Finance and policy reporter
·3-min read
People walk in Hyde Park, London, during England's third national lockdown to curb the spread of coronavirus.
People walk in Hyde Park, London, England. Photo: PA

The UK unemployment rate has hit its highest level since 2016, leaving more than one in 20 jobless as the coronavirus crisis hammered the UK labour market.

The latest official figures from the Office for National Statistics (ONS) published on Tuesday suggest 5% of the workforce was job-hunting in December, the highest in more than four years. It had stood at 4.9% a month earlier, though is lower than the rise to 5.1% expected by analysts.

Some 2.6 million people are now claiming out-of-work and low-income benefits, 1.4 million more than in last March.

The number of payroll employees dipped by another 52,000 compared with November, leaving a total of 828,000 fewer salaried staff compared with February in the very early stages of the pandemic.

Meanwhile a gradual recovery in vacancies slowed down between October and December, and the number of people who reported being off work without pay because of COVID-19 also edged higher.

The claimant count hit 2.6 million, reflecting the number receiving out-of-work and low-income benefits. Chart: ONS.
The claimant count hit 2.6 million, reflecting the number receiving out-of-work and low-income benefits. Chart: ONS.

Average pay levels have risen by 3.6% year-on-year, but the ONS attributed much of the apparent rise to a decline in the number of low-paid jobs since the virus and lockdowns hit the UK.

But some of the ONS data has been described as “deeply flawed” by the Alliance for Full Employment (AFE), a campaign group spearheaded by former Labour prime minister Gordon Brown.

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Unemployment is likely to be much higher than official figures suggest, according to AFE analysis published this week.

It argues joblessness likely stood at more than 2 million in November, more than 300,000 higher than official figures. It could be as high in percentage terms as in the aftermath of the global financial crisis, and is predicted to rise to 3.5 million later this year.

The AFE figures are based on a study of tax records, suggesting the total number of paid employees is 785,000 less than estimates used to calculate unemployment figures. An exodus of migrant workers leaving the UK would explain part of the gap, though the rest remains a “puzzle,” the AFE said.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, noted the furlough scheme's extension until March on more generous terms had likely slowed the pace of job losses late last year, however. 15% of employees were on furlough in early November, versus 9% a month fortnight earlier.

Chancellor Rishi Sunak said: “This crisis has gone on far longer than any of us hoped – and every job lost as a result is a tragedy.

“Whilst the NHS is working hard to protect people with the vaccine we’re throwing everything we’ve got at supporting businesses, individuals and families.”

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