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A surge in redundancies and a slump in hiring pushed UK unemployment up to 4.8 per cent in the three months to September, official data showed on Tuesday.

The figures reflect a wave of job cuts made as the government tapered wage support for workers furloughed under its Job Retention Scheme, which had been due to close at the end of October but has now been extended until the end of March next year.

Redundancies climbed to a record high of 314,000 between July and September, a rise of 195,000 from the previous year and 181,000 from the previous quarter, the Office for National Statistics said. Weekly figures showed especially strong growth during the first two weeks of September, when employers had to pay more towards the cost of furloughed workers in the run-up to the scheme’s scheduled end.

“The government’s failure to face up to the scale of this jobs crisis in time has cost people their livelihoods,” said Jonathan Reynolds, Labour’s shadow work and pensions secretary. He called on ministers to provide urgent support for those who had lost jobs and to fund the creation of new roles through green investment.

Rishi Sunak, the chancellor, said the figures “underline the scale of the challenge we’re facing”, adding: “I want to reassure anyone that is worried about the coming winter months that we will continue to support those affected.”

Job losses look set to climb further: the unemployment rate averaged 4.8 per cent over the three months to September, but experimental weekly figures from the ONS put it at 5.1 per cent by the end of that period.

The UK employment rate stood at 75.3 per cent in the three months to September, with 32.51m people in work — almost a quarter of a million fewer than a year earlier.

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Despite the weakening of the labour market, unemployment remains well below the worst-case projections of the Office for Budget Responsibility, and economists said the extension of government income support would both delay and limit the damage.

The fall in employment was especially steep for young people, with a drop of 174,000 on the quarter among 16 to 24-year-olds, down to a record low of 3.52m. There was also a clear divide by gender, with men faring much worse than women. And there has been a dramatic drop in the foreign-born workforce, with the number of EU nationals working in the UK 364,000 lower than a year earlier, and the number of non-UK nationals from other countries down by 65,000.

Samuel Tombs, at the consultancy Pantheon Macroeconomics, said the chancellor’s change of tack on furlough had “greatly improved the near-term outlook for employment”, especially as hopes of a vaccine might now persuade companies to keep staff on their books over the winter in expectation of a recovery in demand next summer.

Tony Wilson, director of the Institute for Employment Studies, said the changes in unemployment and employment were “worrying but not catastrophic”, although the continued dearth of hiring was troubling.

He noted that the number of people starting a new job between July and September was even lower than it had been during the spring lockdown. “Every recovery is built on a rebound in hiring but it didn’t happen in the summer,” he said.

This lack of hiring is one reason why youth unemployment has risen much faster than the overall jobless rate, with few openings for new labour market entrants.

Separate figures published on Wednesday by the Institute of Student Employers show a 12 per cent drop in the number of graduate jobs in 2020, and a much bigger fall in the number of internships and placements that often lead to permanent roles, with most employers also planning to cut recruitment in 2021.

Business groups, think-tanks and unions said government policy was now too narrowly focused on protecting jobs, and urged ministers to do more to spur new job creation, by cutting employer taxes, or by directly funding new jobs in the green economy and public services.

The ONS data gave some early signs of the labour market starting to pick up in the autumn, but this was before the spread of local Covid-19 restrictions and the announcement of the second national lockdown.

The ONS said data from HM Revenue & Customs suggested only a slight drop of 33,000 in the number of payroll employees between September and October, although this still left the number on company payrolls at 782,000 below pre-pandemic levels.

The number of vacancies advertised climbed steadily from August to October, driven by hiring in small businesses, but it remained almost a third lower than a year ago, even at the end of this period.

Annual growth in employees’ pay was stronger than the previous month — reflecting people returning to work on full pay after a period on furlough. However, this too was well below pre-pandemic levels, with annual growth of 1.3 per cent in total pay and 1.9 per cent in regular pay — the gap between the two measures reflecting lower bonuses.

And although the return of furloughed workers drove a rebound in working hours from the lows of the spring lockdown, average weekly hours were still below their level in March, and total weekly hours worked in the UK were more than a tenth below pre-pandemic levels.

“As the crisis enters its ninth month and second lockdown, job losses will continue to mount,” said Nye Cominetti, economist at the Resolution Foundation. “Crucially, this is as much about those out of work struggling to find new roles as it is about job losses.”

By Delphine Strauss

Source: Financial Times

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