Press release

15 Jun 2021 London, GB

April’s relaxation of restrictions looks to have boosted the jobs market – EY ITEM Club comments

The Labour Force Survey (LFS) jobless rate fell to 4.7% in the three months to April, aided by the reopening of non-essential retailers. The delay to June’s easing of restrictions will slow job creation but the EY ITEM Club says it is unlikely to have significant long-term consequences

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Related topics Growth COVID-19
  • The Labour Force Survey (LFS) jobless rate fell to 4.7% in the three months to April, aided by the reopening of non-essential retailers. The delay to June’s easing of restrictions will slow job creation but the EY ITEM Club says it is unlikely to have significant long-term consequences
  • Meanwhile, the headline three-month year-on-year rate of pay growth rose in April to a near-14-year high. But the pace was exaggerated by more workers coming off furlough and comparisons with weak pay levels in April 2020. 

Martin Beck, senior economic advisor to the EY ITEM Club, says:

“It was already evident that the reopening of non-essential retailers in April helped deliver healthy rises in GDP and retail sales, while the fruits of the easing of restrictions were also apparent in the labour market numbers. A rise in employment in April helped push the single-month LFS unemployment rate down to 4.8% from 4.9% three months earlier. This contributed to April’s three-month average jobless rate declining to 4.7%, the lowest since last summer and down from 5% in the previous quarter. 

“There was also good news from HMRC PAYE data. The number of paid employees rose by a strong 197,000 in May, although this still left the level just over half-a-million short of February 2020’s pre-pandemic peak. 

“The Government’s decision to delay the lifting of remaining restrictions in England beyond 21 June will probably slow the return of workers from furlough. But if the four-week delay doesn’t slip, the long-term effect on employment should be small, particularly if the Chancellor provides more support. Postponing current plans to cut the Government’s grant for furloughed workers’ pay from 80% to 70% on 1 July would be an obvious measure. 

“The EY ITEM Club expects the jobless rate to rise to around 5.5-6% by the end of the year. But this would be a remarkable achievement given the shock the economy has experienced.

“One thing we can be sure about is that average pay growth will accelerate further in the short term. Headline three-month year-on-year pay growth rose to 5.6% in April, a near-14 year high. But this was flattered by compositional effects, workers returning from furlough and comparisons with depressed pay levels in April 2020. These factors are likely to push pay growth up to over 7% year-on-year during the summer. But their effects will fade as the year progresses.”