UK unemployment claim count records nearly 70 per cent spike, crosses two million

THE number of people claiming unemployment benefits in Britain leapt to its highest level since 1996 in April, the first full month of the government's coronavirus lockdown, data published on Tuesday (19) showed.

The claimant count rose by 856,500 -- the biggest ever month-on-month jump -- to 2.097 million, a 69 per cent increase, the Office for National Statistics said.

The UK, in fact, is bracing for worse job scenario.

"I think we should be prepared for the unemployment rate to increase significantly," Secretary of State for Work and Pensions Thérèse Coffey told BBC.

The surge would have been even sharper without a government programme to pay 80 per cent of the wages of workers put on temporary leave by their employers, who do not count towards the unemployment total.

On Monday, Rishi Sunak said over eight million employees were now covered by that scheme, and more than two million claims had been made under a parallel programme for self-employed workers.

The chancellor had recently extended the scheme -- the centrepiece of its attempts to cushion the coronavirus hit to the economy -- by four months, but said employers would have to help meet its huge cost from August.

He said furloughed employees could rest assured that they would continue to get 80 per cent of their wages up to £2,500 a month until the end of October.

Sunak, however, stressed that the scheme was expensive and could not continue indefinitely.

"We have stretched and strained to be as generous as possible to businesses and workers," he told Parliament.

"This scheme is expensive. It is the right thing to do -- the cost of not acting would have been far higher -- but it is not something that can continue indefinitely into the future."

Sunak also warned that it would take time for the economy to get back to normal even after the lockdown is lifted.

"It is not obvious that there will be an immediate bounce-back," he told Parliament, saying the retail sector, for example, would still face restrictions when it reopens.

"In all cases, it will take a little bit of time for things to get back to normal, even once we have reopened currently closed sectors."

The ONS said emergency changes to Britain's welfare system meant the claimant count number included more people who were still actually in work than normal, but the scale of the rise in claims showed the hit to the labour market.

"While only covering the first weeks of restrictions, our figures show Covid-19 is having a major impact on the labour market," ONS Deputy National Statistician Jonathan Athow said.

A medial poll of economists had produced a median forecast for a leap of 676,500 in the claimant count, with forecasts ranging widely from just over 56,000 to as high as 1.5 million.

Tej Parikh, chief economist at the Institute of Directors, said the government's wage subsidy scheme was holding off some job losses for now but it was not clear how firms would react when they are required to help fund it from August.

"Many companies will still be in the middle of a cashflow crisis, and will struggle with any cost increases. Government faces an onerous task in winding down the scheme without causing too much pain," he said.

VACANCIES PLUNGE, PAYROLL TOTAL FALLS

Vacancies fell by the most on record in the February-April period with hospitality job openings dropping the most.

Experimental data, based on tax figures, showed the number of people on companies' payrolls fell by 1.6 per cent in April from March, equivalent to the loss of nearly 450,000 jobs.

George Brown, an economist with Investec, said the claimant count and vacancies figures probably underestimated the scale of the hit to the jobs market because they reflected the picture at the start of April.

Other data served as a reminder of how strong Britain's labour market was going into the COVID-19 crisis.

Britain's unemployment rate fell to 3.9 per cent in the January-March period, which covered only one week of the lockdown which began on March 23, from 4 per cent in the three months to February.

Growth in pay slowed but employment expanded by a much stronger-than-expected 211,000.

But with much of the economy shut down by the government, Britain could be heading for its sharpest economic slump in more than 300 years, the Bank of England has warned.

The country's budget forecasters say unemployment could hit 10 per cent in the April-June period, even with millions of workers shielded by the government's wage subsidy scheme.