British pound soars to three-month high after unemployment rate dips to 4.8%
UK labour market hints at recovery but 772,000 fewer people are on the payroll compared with pre-pandemic peak
The British pound rose to a three-month high against the US dollar on Tuesday after the country's unemployment rate dipped to 4.8 per cent in the three months to March.
The fall in the jobless level, down from 4.9 per cent in February, according to the Office for National Statistics, came despite England spending the period in its third lockdown and employment surging by 84,000 – the first gain since the pandemic started.
The positive news saw the pound rise above $1.42 for the first time since February in early London trading, and at 10.25am London time sterling was up around 0.58 per cent on the day at $1.4216.
The country saw increased hiring in April, another sign that Britain’s labour market could recover under the government’s job support programme.
Chancellor of the Exchequer Rishi Sunak said the figure reflected the effect of the government’s focus on protecting jobs during the Covid-19 crisis.
“While sadly not every job can be saved, nearly 2 million fewer people are now expected to be out of work than initially expected – showing our Plan for Jobs is working,” Mr Sunak said.
The number of workers on payrolls rose by 97,000 from March to April but was still 772,000 lower than before the pandemic struck, while job vacancies, up 8 per cent on the last quarter, hit their highest level in more than 12 months.
Darren Morgan, ONS director of economic statistics, said the strong rise in the number of employees last month came as the economy began to reopen, continuing the improvement from its November trough.
“There remains, however, three quarters of a million people fewer on the payroll compared with the pre-pandemic peak,” Mr Morgan said.
“With many businesses reopening, the recent recovery in job vacancies continued into April, especially in sectors such as hospitality and entertainment.”
Britain’s jobs outlook has improved significantly in recent months, with the government announcing plans for a full reopening of the economy by June 21 and then extending income support for furloughed workers until the end of September.
The rosier picture saw the number of people in employment jump by 84,000 in the first quarter of 2021, the first increase since the coronavirus crisis began, while those classed as unemployed fell by 121,000.
However, the crisis has still left an uneven mark on the labour market with the inactivity rate – measuring people who are not looking for work – on the rise and at a record high for men.
Another challenge for the government is getting young people back to work, with unemployment among 18 to 24 year olds running at double the national average.
Matthew Percival, director of people and skills at the Confederation of British Industry, said having the highest number of vacancies since the outbreak of the pandemic shows the value of the road map for reopening the economy.
“However, businesses are starting to report vacancies they're struggling to fill so government support for skills and retraining is essential,” Mr Percival said.
As venues reopened to the public last month, hospitality businesses said they were struggling to recruit waiters and chefs to fill the 355,000 positions lost during the pandemic.
While some furloughed workers chose to work in other industries because of the unstable nature of the hospitality sector during the crisis, European and foreign workers are struggling to return to the UK because of travel restrictions creating a “crunch point” for the sector.
“Businesses increasingly need to know what rules will be in place after June 21 to make their next reopening decisions,” Mr Percival said.
“They're hoping to avoid any further bumps in the road and will be closely watching the trajectory of new variants and the conclusion of reviews into social distancing and Covid-status certificates.”
There were still 4.2 million people on furlough at the end of March, the latest ONS data showed, with experts concerned this might still affect the employment outlook when the government’s support scheme ends in September.
“Nobody expects all of them will return to the jobs they left. And the timing of the scheme’s end is potentially cause for concern, coming as the night’s draw in and outdoor socialising becomes harder,” said Danni Hewson, AJ Bell financial analyst.
Average wages excluding bonuses grew 4.6 per cent in the quarter through to March. However, the figures were skewed by the loss of lower-paying jobs, and the ONS estimated the underlying growth rate was around 3 per cent. Pay and inflation pressures could be fuelled by labour shortages.
Meanwhile, hopes for the strongest economic rebound in decades are being overshadowed by the highly transmissible Indian variant of coronavirus, which has been found in dozens of districts across the country.
“New variants are very much on the mind. Could they scupper June’s plans for a complete lifting of social distancing restrictions?” Ms Hewson said.
“Without a crystal ball, it’s impossible to predict what might happen next or how the economy would react. Right now, 10 per cent unemployment seems unlikely but it’s not totally out of the question and both jobs figures and wage growth need to be watched carefully.”
Updated: May 18, 2021 02:17 PM