The UK unemployment rate again surprised on the positive side, staying at 3.9% for the three months to April, rather than rising to 4.7% as expected.
Employment actually grew 6K (vs -110K expected). Regular pay growth, however, dropped sharply.
Last week’s US payrolls report was a big positive surprise. This is not that kind of surprise. Look beneath the surface of the headline unchanged unemployment rate, and a lot has changed:
- Experimental data from HMRC/Office for National Statistics (ONS) using PAYE data, also published today, suggests a much less healthy picture. That data shows that in April, the number of paid employees fell by 449K between March and April. Early estimates for May indicate another 163K fall.
- The claimant count has continued to rise (although the ONS cite an increase in eligibility for Universal Credit there – consequently the data are difficult to read and the ONS say they are unable “to identify to what extent people who are employed or unemployed have affected the numbers”).
- The number of vacancies in May fell to a record low, falling 342,000 over the three months to May.
- There was a large fall in the numbers of hours worked, reflecting furloughed workers: The total number of weekly hours worked in the three months to April fell 8.9%. Unsurprisingly perhaps, hours fell the most in the “accommodation and food service activities” sector.
- The ONS say the numbers of people “temporarily away from work” rose by 6 million at the end of March into April.
- Real terms pay fell for the first time since January 2018. According to the ONS, pay declined in industries where furloughing was most prominent.
- There was a record decrease in the numbers of self-employed.
Why was the unemployment rate unchanged? Employment in the UK statistics includes those in employment, but with a job they were “temporarily away from”, which should capture most of the furloughed workers therefore. However, for many companies, demand will still be running well short of pre-crisis levels. So long as that remains the case, as the furlough scheme unwinds, the headline unemployment numbers are likely to worsen; Some companies are likely to let workers go, rather than keep them on the payroll as government support is withdrawn.
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