UNEMPLOYMENT has raced past 5% the latest official figures show, with worse to come, putting pressure on the Chancellor to provide more financial relief and the Bank of England to slash interest rates below zero.
Young workers in London, especially in the largely closed pub, restaurant and hotel trade are hit worst of all by a job tsunami which is the worst since the financial crisis of 2009.
Analysts say many workers are in “zombie” jobs supported only by furlough schemes. Once they end, unemployment, already at a five-year high, will soar further.
Unemployment is now at 1.72 million with 200,000 jobs lost between February and December, said the Office for National Statistics. More than 800,000 jobs have gone in a year.
ONS economist Sam Beckett said: “Parts of London have seen the steepest percentage falls, followed by North Eastern Scotland.”
Before today City economists thought employment would peak at 7.5% this summer, a figure that now looks optimistic.
Dan Lane of investment platform Freetrade said: “This could get a lot worse before it gets better. Zombie jobs only existing through furlough at the moment pose the risk of a spike in unemployment when furlough ends.”
There are 4.5 million workers on furlough.
Wages are actually rising at 3.6% according to the statistics, but that is mostly down to the extinction of low paid jobs. Interest rates already at a low of 0.1% could go negative.
Laith Khalaf, financial analyst at AJ Bell: “The deteriorating data throws into fresh focus the Bank of England interest rate decision next week, where negative interest rates will be a point of discussion… much depends on the course of the pandemic, but despite record low interest rates, the monetary policy outlook in the UK remains tilted towards rate cuts rather than rises.”
Former Prime Minister Gordon Brown said at the weekend that the real unemployment crisis is in the future.
Tej Parikh, chief economist at the Institute of Directors, said: "The pandemic continues to rip through the labour market. It is now crucial that the Job Retention Scheme and other Covid-19 economic support is extended beyond the spring to support employment as restrictions continue. The forthcoming Budget is a vital moment to help firms retain, retrain and rehire workers as the vaccine rolls out. In particular, the government should provide a relief for employers' National Insurance contributions and support reskilling opportunities to shore up the recovery."
Jon Hudson, UK Equity Fund Manager at Premier Miton Investors, commented:
“While the unemployment rate has ticked up, government support packages such as the furlough scheme are masking the true underlying number. Given the unemployment rate remains well below previous recessions, it is likely to continue rising over the coming months.”
Chancellor Rishi Sunak is under some pressure to bring in tax increases as well as to keep supporting the economy with subsidies.
Jack Kennedy, UK economist at the global job site Indeed, said: “The slowdown is turning into a slide. Warning lights on the labour market dashboard are now burning bright, even with the cushioning effect of furlough.”