- The three months to August saw the unemployment rate decline to 4.5% and the number in work climb further, despite over one million people coming off furlough during that period. And job vacancies rose to a new record.
- Employers’ appetites for workers suggests that any rise in joblessness prompted by the end of the furlough scheme will be modest. It is also one reason why, despite headwinds, the economic recovery is not out of supports.
Martin Beck, senior economic advisor to the EY ITEM Club, says:
“Despite GDP data suggesting the recovery lost some steam over the summer, the LFS unemployment rate continued to decline in the same period. A jobless rate of 4.5% in the three months to August was 0.4 percentage points down on the previous quarter and the lowest in a year. The employment rate rose 0.5 percentage points to 75.3%, also a 12-month high. And timelier PAYE data showed the number of paid employees growing 207,000 in September, leaving the total slightly above the level in February 2020, just before the pandemic began.
“Granted, the LFS measure of employment still ended the June-August period 600,000 below its pre-pandemic level, reflecting a lower number of self-employed people. But the main labour market measures moved favourably despite 1.1 million workers coming off furlough over the summer, which demonstrates the strength of demand for workers. Meanwhile, vacancies reaching a record high of nearly 1.2 million in September suggests that any jobs shakeout following the end of the furlough scheme on 30 September should be modest.
“What effect strong demand is having on wages remains clouded by comparisons with a weak 2020. Although the influence of base effects declined in the three months to August, several million more workers were furloughed a year earlier (and on 80% of normal salaries) which contributed to regular pay rising 6% year-on-year. This was down from 6.8% in the three months to July, but still well above any estimate of underlying pay growth. On the inflationary threat posed by significant pay rises, the EY ITEM Club believes that the MPC will want to continue watching and waiting.”