UK unemployment ‘worst since 2015’ as jobs boom stalls
Britain’s jobs boom is grinding to a halt under the weight of the coronavirus, with new figures showing a leap in unemployment benefit claims and employers cutting on hiring.
Recent years have seen employment hit a record high, in what some have called a “jobs miracle.” But analysts say UK unemployment may now have soared to its highest in almost five years, after just under half a million applications for the universal credit benefit in just nine days.
It comes amid warnings Britain could face the worst recession in modern history, as the coronavirus and government lockdown to contain it paralyse the economy.
Unemployment ‘highest since 2015’
Britain’s benefit system has seen a recent surge in new claims as a health emergency has rapidly spiralled into an economic one. A minister confirmed this week 477,000 people applied for universal credit in just nine days.
The Resolution Foundation think tank said it showed Britain was “in the midst of an unemployment crisis,” with the figure dwarfing anything seen even during the financial crash over a decade ago.
The numbers mean Britain’s unemployment rate may already be at 5.3%, according to a Bank of America (BofA) Global Research report sent to clients on Thursday. That would mark the highest rate since summer 2015, official figures show.
Sobering economic fact of the day – 477,000 new Universal Credit claims in the past nine days alone. Dwarfs anything we saw during the financial crisis – though it may simply reflect the rapidity of the current shock. Either way, we are in the midst of an unemployment crisis pic.twitter.com/vLdK22iHMh
— Resolution Foundation (@resfoundation) March 25, 2020
Such a 1.5 percentage point jump in a matter of weeks would be around half the entire spike seen during the credit crunch, the report said. Not all universal credit claimants are unemployed however, with low earners also eligible.
BofA analysts said the economic shock was “worse than we feared” just a week earlier, when they had forecast a 2% hit to UK GDP.
They warned the government’s unprecedented package of loans and wage subsidies to keep firms afloat “may not prevent large lay-offs,” with firms buckling under cashflow woes before government schemes pay out.
Policymakers may also be looking nervously at jobs data from the US, where a record 3.3 million workers applied for unemployment benefits last week.
Employers scrap hiring plans
The economic shock threatens future jobs as much as existing ones.
A spokesperson for UKHospitality told Yahoo Finance UK last week that firms had not only let go of half a million staff in recent weeks, but also no longer needed to hire the same number of seasonal workers.
A new survey of private and public sector employers published on Friday found confidence in hiring has plummeted between February and March.
The Recruitment & Employment Confederation (REC) said the net balance of employers looking for permanent staff in the medium term had fallen by 12 percentage points in a month. Demand among small firms dropped further, down 19 percentage points.
Sentiment about the economy also turned negative after months of improvement, according to the REC’s Jobs Outlook report.
The survey was carried out between 2 and 20 March, even before the government ordered “non-essential” stores and hospitality outlets to close and the public to stay at home for all but critical travel.
Separate figures from jobs site Glassdoor on Thursday painted a similar picture, with a stark reversal in hiring trends. The number of vacancies was rising in January, but has been falling in recent weeks.
Travel, tourism, arts and entertainment have seen the steepest fall in vacancies as demand has “quickly and very dramatically declined,” said its senior economist Daniel Zhao.
But Zhao noted job vacancies increasing in healthcare, predicting it would continue to rise alongside the logistics sector as cases rise and online deliveries boom. Supermarkets have also embarked on a hiring spree as they struggle to deal with a boom in consumer stockpiling.