UK unemployment rate hits 4% as vacancies fall amid pandemic

Perceptions of job security are plummeting, according to new survey data by IHS Markit

Pedestrians cross Westminster Bridge in view of the Houses of Parliament in London, U.K., on Thursday, April 9, 2020. U.K. Prime Minister Boris Johnson spent a third night in the critical care unit where his condition is improving, as officials draw up plans to extend the lockdown in an bid to control the U.K.’s growing coronavirus crisis. Photographer: Simon Dawson/Bloomberg
Beta V.1.0 - Powered by automated translation

UK unemployment increased to 4 per cent in the three months to February, up 0.1 per cent on the previous quarter but largely flat year-on-year, said the Office for National Statistics.

The number of job vacancies in the three months to March also fell to 795,000, down 6.5 per cent year-on-year.

The unemployment numbers cover a period prior to the UK imposing restrictions on movement to fight Covid-19 on March 23 and are likely to increase in the coming months given the negative perceptions about the outlook for the economy.

The UK pound weakened against the US dollar, trading 0.34 per cent lower against the US dollar at $1.24 by 12noon UAE time on Tuesday.

“Sterling took a hit on the back of this [unemployment] number,” said Naeem Aslam, chief market analyst at forex broker AvaTrade. “The coronavirus pandemic has had a major influence on the UK’s economy and it is highly likely that the unemployment rate may jump up to 10 per cent”.

Last week, the International Monetary Fund forecast the UK economy would shrink 6.5 per cent this year, and grow only 4 per cent next year, meaning a full recovery from the hit caused by the pandemic is unlikely until 2022 at the earliest.

A UK Household Finance Index published on Monday by IHS Markit reported that perceptions of job security plunged to a record low this month as households reported a decrease in earnings for the first time since October 2017. The scale of the drop in income reported was the lowest since the survey began in 2009 “by a wide margin”.

The headline index, which measures households’ overall perceptions of financial wellbeing, dropped to 34.9 in April – its lowest level since November 2011 – from 42.5 in March. A reading above 50 indicates an improvement in household finances and a reading below 50 indicates a worsening.

“This was to be expected as workers have been placed on furlough and applications for universal credit have risen substantially in recent weeks,” said Joe Hayes, an economist at IHS Markit.

“Around one in three UK households reported a decline in income from employment during April, which was by far the largest number since the survey began in 2009.”