Britain’s unemployment rate unexpectedly falls to 5% in January

Young people hardest hit by job losses during latest lockdown

The City of London financial district can be seen as people walk along the south side of the River Thames. During the three months from November to January, about 1.7 million people were unemployed – 360,000 more than the same period a year earlier. ReutersShow less

Britain’s unemployment rate unexpectedly fell to 5 per cent in the three months to January despite many parts of the country entering a third Covid-19 lockdown, according to official data.

The fall from 5.1 per cent recorded in the three months to December offers hope that that the UK can start to recover from its worst recession in 300 years, the Office for National Statistics said.

However, the headline figure disguises the fact that young people are suffering the brunt of the job losses.

UK finance minister Rishi Sunak said the pandemic caused “one of the largest labour market shocks this country has ever faced”.

“We have taken decisive action with a £352 billion ($487.29bn) package of support,” Mr Sunak said in a statement on Tuesday.

“The continued success of the vaccine rollout provides us with hope for the future, and through our Plan for Jobs, we will continue to support people throughout the months to come."

During the three months from November to January, about 1.7 million people were unemployed – 360,000 more than in the same period a year earlier.

Mr Sunak extended the Job Retention Scheme until the end of September in his March budget to help individuals and businesses survive the raft of restrictive measures currently in place.

Since January, non-essential shops, restaurants and hospitality venues have been closed in England, with similar measures in other parts of the country.

A woman wearing a face mask is reflected in the window of a closed barbers in the square mile in London, England. Hairdressers in London have been closed since December and are scheduled to reopen April 12. Getty Images

The speedy vaccination programme has reduced new infections and allowed English schoolchildren to return to school this month, while shops are due to reopen next month, but restrictions on hospitality will remain until at least late June.

A total of 4.8 million employees were furloughed at the end of January, helping to protect the unemployment rate from soaring, according to Ruth Gregory, senior economist at Capital Economics.

“The drop in the unemployment rate from 5.1 per cent in December to 5 per cent in January highlights once again the extent to which the government’s job furlough scheme has protected jobs during the pandemic,” she said.

“We still expect the unemployment rate to rise further to a peak of 6 per cent by early 2022, but that would be a much better result than most feared only a few months ago,” she said.

The rise in unemployment was also restrained by a leap in the number of people counted as economically inactive and outside the workforce as people who lost their jobs left the labour market instead of searching for a new role.

Separate data showed the number of employees on payrolls rose 68,000 in February, the third consecutive monthly increase, while job vacancies from December to February increased 8 per cent to a total of 601,000.

However, there were almost 700,000 fewer people on payrolls compared with February last year, indicating a large fall in employment since the start of the crisis, and young people are taking the biggest hit with two-thirds of that fall made up of under 25s.

Keeping people in work and pay has been vital in preventing more serious damage throughout the pandemic, said Becky O’Connor, Head of Pensions and Savings at interactive investor.

“Over the coming months, a key indicator of recovery will be whether a rising number of people are going back to their old jobs, as shops and venues open up again, or finding new ones,” she said.

A member of the public walks past empty offices in London. A year since the British government issued its first stay-at-home order in response to the Covid-19 pandemic, on March 23, the City of London is still a ghost town of shuttered shops and restaurants and scarcely populated offices. Getty Images

On a more positive note, the number of redundancies fell slightly across the UK to 11 per 1,000 people in January – down from 14 per 1,000 two months earlier.

Meanwhile, average wage growth rose to 4.8 per cent, its highest since March 2008, however this reflected that job losses have been greatest in low-paid sectors such as retail and hospitality, rather than higher pay for people who are still in work.

The ONS said the jobs crisis remains acute, with 368,000 payroll jobs lost in the hospitality sector since the start of the crisis and 123,000 lost in the retail sector.

Helen Dickinson, chief executive of the British Retail Consortium, said while the second wave of the pandemic swept away tens of thousands of retail jobs, many more were saved by the Government’s furlough scheme, which is now providing support for 600,000 retail workers, a rise of 200,000 since December.

“The biggest threat to jobs and shops will be future lockdowns beyond April 12, and it is imperative the Government takes all necessary precautions to prevent that from happening,” she said.

“Any delays to the Prime Minister’s roadmap will undoubtedly result in more store closures and threaten the livelihoods of the retail workers currently furloughed.”