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Sunak’s relief over rising UK employment may be short-lived

Rishi Sunak is too savvy an operator to declare victory in the battle against unemployment because the past 18 months have shown that the unexpected can happen, and often does.

Yet while noting that there could still be “bumps in the road”, the chancellor is certainly relieved by how well the UK labour market has recovered from the effects of the Covid pandemic.

The latest jobs bulletin from the Office for National Statistics showed the employment rate up and the unemployment rate down. Job vacancies hit 1m for the first time in July and the number of hours worked a week – while still below their pre-crisis levels – passed 1bn for the first time since early 2020. Without question, this was an extremely strong report.

Three big imponderables remain. The first is whether the labour market will be knocked off course by the large number of daily cases of the Delta variant of the virus being reported in recent weeks. Thus far, the boost to employment from reopening the economy after its winter lockdown has outweighed any headwinds from the “pingdemic” or consumers becoming more nervous due to fears of falling ill.

The second issue looming is whether unemployment will start rising now the furlough scheme is being phased out. Wage subsidies have been – along with the development of vaccines – one of the two main success stories of the past 18 months and the TUC says it is premature to bring them to an end next month.

Sunak thinks the furlough scheme can be phased out relatively painlessly because half the people still on the scheme are on flexi-furlough, working some hours in their old jobs.

The ONS said there was no evidence of redundancies increasing before employers having to make a contribution to the costs of the furlough in July, which supports the chancellor’s view that firms are less likely to make people redundant if they are paying a share of their wages.

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Even so, the continued problems of certain sectors and the structural changes to the economy since the start of 2020 – more working from home and an increase in online shopping, for example – mean some dislocation is inevitable.

Finally, there is the question of what the Bank of England does in response to a labour market in which there appears to be little spare capacity. In the three months to June, annual growth in average earnings reached 8.8%, up from 7.4% in the three months to May and the highest since the current series began 20 years ago.

On the face of it, there is a case for immediate action from Threadneedle Street to prevent a wage-price spiral.

Appearances can be deceptive, however. Most of the annual increase in earnings was due to weak wage growth during the spring of 2020 and the fact that job losses were concentrated in low-paid sectors such as hospitality. Underlying pay growth once these factors are stripped out is running at 2%, according to Ruth Gregory, a senior economist at Capital Economics. Threadneedle Street has no need to rush into a decision: it has time to see how things pan out in the next few months.

By Larry Elliott

Source: The Guardian

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UK job vacancies highest for a year as lockdown eases

UK job vacancies have hit their highest level since the start of the pandemic as the easing of lockdown measures has led employers to start recruiting.

In the February-to-April period there were 657,000 vacancies, up about 48,400 on the previous quarter.

The unemployment rate fell slightly to 4.8% in the three months to March, down from 4.9% in February, the Office for National Statistics said.

The ONS said there were “early signs of recovery” in the jobs market,

However, despite the rise in job vacancies over the past 12 months, the level remains almost 128,000 below its pre-pandemic level in the January-to-March quarter of 2020.

The official figures confirm several reports in recent weeks by recruitment companies that they are seeing a rise in job advertisements, leading to concern among some employers that they could face staff shortages.

The ONS said the number of workers on payrolls had risen by 97,000 between March and April, but was still 772,000 lower than before the pandemic struck.

Darren Morgan, ONS director of economic statistics, said the number of employees on payroll “rose strongly in April” as the economy began to reopen, continuing an improvement from its November trough.

But he said: “There remains, however, three-quarters of a million people fewer on the payroll compared with the pre-pandemic peak.

“With many businesses reopening, the recent recovery in job vacancies continued into April, especially in sectors such as hospitality and

Chancellor Rishi Sunak said the latest figures showed the impact of the government’s focus on protecting jobs during the pandemic.

“While sadly not every job can be saved, nearly two million fewer people are now expected to be out of work than initially expected – showing our Plan for Jobs is working.”

Business leaders welcomed the vacancy levels as positive signs for the economy, but warned there was still a long way to go.

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‘I’ve applied for 500 jobs’

As many experts have pointed out, Tuesday’s positive jobs news does not disguise that many people in the labour market are still struggling.

Interior designer Sheila Smith lost her job working for hospitality venues in October – and despite some 500 applications is still unemployed.

She worries that businesses are looking for someone younger and cheaper than her. “I’ve been for a few interviews, which I haven’t been successful at,” she told the BBC.

She said the most frustrating aspect of the job search was the lack of communication from potential employers.

“When you take time to go for a job interview, get yourself prepared, but then you hear nothing back – that’s the most frustrating thing.”

Although the number of job vacancies is rising, they are still well down on pre-pandemic levels and Sheila reckons there’s about 200 people applying for each post advertised.

“It destroys your confidence,” she said. “I’ve worked solidly for years in the industry, and you find yourself in this situation scrambling for jobs.

“You feel like you’re stuck at square one.”

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Matthew Percival, director of people and skills at the CBI business lobby group, said: “Businesses are starting to report vacancies they’re struggling to fill so government support for skills and retraining is essential.”

He added that companies still needed clarity over the rules for the next stage of reopening the economy, which is currently planned for 21 June.

Research consultancy Capital Economics said the fall in the jobless rate showed that the jobs furlough scheme was “insulating the labour market”.

The firm added that although it expects the unemployment rate to rise over the next few months, that would most likely be due to people returning to the labour market rather than people losing their jobs.

The most encouraging sign here is that vacancies over the three months to April averaged 657,000. The ONS said its experimental monthly vacancy statistics for April itself were “at near pre-pandemic levels”. There are increasing numbers of employers expressing concern about recruitment difficulties.

The jobs data continue to show some signs of resilience and recovery, with unemployment down again to 4.8%, and employment up for the fifth consecutive month. It’s so far a slow recovery based on gradual re-openings seen up until last month.

The pattern is, though, as uneven as the lifting of the restrictions. Hospitality and retail jobs are still well down on pre-pandemic levels, and this means all of the loss in payrolled jobs and more can currently be explained by what has happened to young workers. There are still over four million workers on the furlough scheme, who count as employed.

Source: BBC

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UK economy is building momentum as Covid restrictions ease

UK economy is building momentum and the Bank of England is expected to sharply upgrade its annual growth forecasts next week, as a Guardian analysis shows rapid progress rolling out the Covid vaccine is fuelling a boom in consumer spending.

Activity has held up better than expected after businesses adapted to life under the third national lockdown, while the reopening of non-essential retail and hospitality venues outdoors in England and Wales has benefited from pent-up demand.

Unemployment has fallen for two consecutive months, as companies started hiring again. Retail sales rebounded in March, before the official retail re-opening, as consumers began to spend accumulated savings and manufacturer confidence returned to levels not seen since 1973.

However, with India suffering a devastating third wave and nearly 5 million UK workers still on furlough, there are concerns over rising unemployment in Britain after government wage support is scaled back this summer and closed entirely by the end of September.

In the past year, the Guardian has tracked the economic fallout from the pandemic on a monthly basis, following infection rates, eight key growth indicators and the level of the FTSE 100. Faced with the deepest global recession since the Great Depression, the Covid crisis watch also monitors Britain’s performance compared with other countries.

As consumers return to high streets and pub beer gardens and take to alfresco dining, the Bank of England is poised to issue one of its most substantial economic growth upgrades in recent decades after a raft of positive data from the UK economy.

Threadneedle Street is expected to revise up its February forecast for a 5% rise in gross domestic product (GDP) this year closer to 7%, according to economists at the US investment bank Jefferies, even if autumn brings with it the reintroduction of some coronavirus restrictions. This would mark the fastest growth rate since 1941 when the UK economy was being pushed to the limit during the second world war.

Earlier this month, the International Monetary Fund said progress administering the Covid-19 vaccine and a more resilient performance than expected in many countries would power a faster global recovery from the pandemic in 2021.

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After contracting by 3.3% in 2020, the IMF said the world economy would now grow by 6% in 2021 and a further 4.4% in 2022 in a sign that substantial economic support from central banks and governments had managed to prevent a heavier toll.

Reflecting the improved prospects in the UK economy, the Washington-based fund forecasts the UK will go from one of the hardest-hit western economies in 2020 to the fastest-growing G7 country in 2022 – outstripping the US, Japan, Germany, France, Italy and Canada.

The stock market has rallied in the past month as infection rates have dropped, with travel, tourism and retail companies gaining most. However, fears over the relaunch of some restrictions are growing as Covid infection rates accelerate in India. Inflation is also starting to rise, amid concern that central banks will be forced to raise interest rates to prevent the world’s biggest economies from overheating.

Britain’s economy contracted by less than expected earlier this year despite the toughest Covid restrictions since the first wave of the pandemic, with growth returning in February as businesses and households prepared for the easing of controls after the government outlined its roadmap for exiting lockdown.

Retail sales rose by 5.4% in March – a month in which there was only a modest relaxation of coronavirus restrictions – in a sign of pent-up demand after months confined indoors, turbocharged by a rise in household savings among wealthier families while much of the economy was closed.

Consumer activity recovered further after the reopening of non-essential shops and hospitality outdoors on 12 April in England and Wales, with a 200% weekly rise in the number of people visiting retail destinations expected to translate into a sharp rise in spending. Meanwhile, industrial output is growing strongly, with manufacturers the most optimistic since 1973. After border disruption caused by Covid and Brexit led to the biggest fall in EU exports on record, continental trade is recovering, but frictions are expected to continue as an endemic feature of Brexit.

Unemployment in the UK fell for a second month in February, raising hopes that a full-blown jobs crisis can be avoided, as employers stepped up hiring to prepare for rising demand. Online job adverts have returned to pre-pandemic levels, while the unemployment rate fell to 4.9% in the three months to February – down from 5% in the three months to January and 5.1% in the three months to December.

However, almost 5 million people remained furloughed. Job losses are expected to rise once the scheme is made less generous in July and closed completely in September, while ongoing structural changes are expected as office workers take longer to return to city centres.

By Richard Partington

Source: The Guardian

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Britain’s economy is full steam ahead, declares Bank of England

UK economy is recovering from the coronavirus recession faster than expected as the vaccine rollout continues, the Bank of England will declare this week.

The central bank, led by Governor Andrew Bailey, looks set to raise its growth forecasts for the UK when it publishes its latest monetary policy report on Thursday.

In its last update in February the Bank pencilled in a 5 per cent rise in output this year following the 9.8 per cent slump in 2020. Unemployment was also slated to rise to 7.8 per cent.

But with the outlook improving, this looks too pessimistic.

Howard Archer, chief economic adviser to forecasting group the EY Item Club, said: ‘The economy looks to have started the second quarter very much on the front foot, benefiting from easing of restrictions and the continued vaccine rollout.

‘The further near-term support to the economy provided in March’s Budget also seems to have lifted confidence.

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‘Significantly, the labour market is showing resilience and survey evidence points to more confident businesses being prepared to take on workers.’ Goldman Sachs last week said it expected the UK economy to grow by ‘a striking’ 7.8 per cent this year – the fastest post-war rate of growth. It would see Britain leave the US and the eurozone in its wake.

In another sign of the UK’s recovery, the Institute of Economic Affairs (IEA) believes no ’emergency measures’ are needed to help pay off the £2trillion national debt pile.

In a report published today, the respected think-tank said tax hikes would be ‘futile’, and instead advised Treasury officials to focus on controlling spending and introducing measures to boost growth.

After analysing other periods when the national debt shot up – during the two World Wars and the Revolutionary Napoleonic Wars of the 18th-19th centuries – the IEA said: ‘Large-scale debt is far from unknown. And it would be misguided and futile to jump to tax-raising measures.

‘The debt can be coped with and the best way of doing that is to encourage economic growth… by removing unnecessary regulation and simplifying taxes.’

Though the Bank is unlikely to hike interest rates just yet, it is expected to slow the pace of QE at this week’s Monetary Policy Committee meeting.

Source: This is Money

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UK economy will grow more than expected in 2021

The UK economy will grow more than expected in 2021 and will regain its pre-crisis peak earlier than predicted, according to one of the country’s most prominent forecasters.

The EY Item Club expects output to increase 6.8% this year rather than the 5% it forecast in January after the economy showed resilience in the past two quarters. As a result, GDP will return to its pre-pandemic high-point in the second quarter of 2022 and not the third, Item said.

The economy shrank by just 1% in the first quarter of 2021 instead of the expected 3-4% and will expand by 4-5% in the current quarter, Item said. Prospects have also been boosted by further support in the February budget, the government’s reopening plan and the NHS’s successful vaccination programme, the research group added.

Item said its forecasts indicated the economy would suffer less permanent damage such as long-term unemployment and the failure of otherwise solid businesses. The forecaster cut its estimate for peak unemployment to 5.8% from 7% forecast in January.

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Surveys on Friday showed services and manufacturing activity accelerating as the economy began to reopen from lockdown and with vaccines increasing confidence in the recovery. Consumer sentiment jumped in the first quarter, paving the way for a sharp rebound in spending, a Deloitte report showed on Monday.

Howard Archer, Item’s chief economic adviser, said: “The UK economy has proven to be more resilient than seemed possible at the outset of the pandemic. Businesses and consumers have been innovative and flexible in adjusting to Covid-19 restrictions and, while restrictions have caused disruption, lessons learned over the last 12 months have helped minimise the economic impact.

“Our latest forecast suggests that the UK economy will emerge from the pandemic with much less long-term ‘scarring’ than was originally envisaged and looks set for a strong recovery over the rest of the year and beyond.”

After plunging by almost 11% in 2020 consumer spending is expected to rise by 4.4% in 2021 and 5.7 in 2022 as unemployment falls and real earnings rise, Item said. Archer said inflation was a risk to watch out for as the economy springs back to life but that the Bank of England was unlikely to increase interest rates until late 2022 at the earliest.

Archer said: “While not every household has been able to save more over the last year, there is likely to be significant pent-up demand released as the economy reopens. Overall, consumers will play a significant role in the economy’s recovery.”

By Sean Farrell

Source: ShareCast

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Unemployment in the UK rises as COVID lockdowns hit economy

The United Kingdom’s unemployment rate edged up to 5.1 percent in the final three months of last year, its highest level in nearly five years, official data shows, as severe COVID-19 lockdown restrictions pressured the economy.

Figures published by the UK’s Office for National Statistics (ONS) on Tuesday showed that the jobless rate rose 0.4 percentage points between the beginning of October and the end of December 2020.

The rise came against the backdrop of regional and national restrictions put in place to curb the spread of the coronavirus pandemic, which has struck the UK hard, killing more than 120,000 people and triggering its biggest fiscal slump in more than 300 years.

Despite a historic government-backed job-retention scheme rolled out in response to the COVID-19 crisis, overall, unemployment had climbed 1.3 percent higher by the end of last year compared with December 2019, the ONS figures showed.

The number of payroll employees tumbled by 726,000 between February 2020 and January 2021, it said.

PM sets out a plan to ease lockdown

The grim ONS figures come as the UK’s finance minister, Rishi Sunak, is reportedly readying to spend billions of pounds in extra support for the economy over the next four months, in line with Prime Minister Boris Johnson’s plan to gradually ease England’s lockdown by late June.

Sunak delivers an annual budget on March 3, when he intends to set out the future of government assistance programmes including the furlough scheme and a 20-pound ($28) weekly supplement to the main unemployment benefit.

Announcing his so-called “roadmap” for easing restrictions on Monday, Johnson said his government would not abandon people and businesses in need of ongoing help from the state.

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Non-essential retailers will not reopen before April 12, at the earliest, under Johnson’s four-step strategy, while some businesses will remain closed until at least June 21.

“People may be concerned about what these changes mean for the various support packages for livelihoods, for people and for the economy,” Johnson told Parliament.

“We will not pull the rug out. For the duration of the pandemic, the government will continue to do whatever it takes to protect jobs and livelihoods across the UK.”

‘Every job lost is a tragedy’

Johnson’s remarks put pressure on Sunak to extend the state-supported 70-billion-pound ($98bn) furlough programme, which is due to expire on April 30, well before most social-distancing restrictions will be lifted.

Under current lockdown rules, people are encouraged to work from home where possible, while hotels and restaurants are closed to the public.

“At the budget next week I will set out the next stage of our Plan for Jobs, and the support we’ll provide through the remainder of the pandemic and our recovery,” Sunak said in a statement.

“I know how incredibly tough the past year has been for everyone and every job lost is a personal tragedy.”

So far, Sunak has spent more than 280 billion pounds ($395bn) on COVID-19 measures, including healthcare, support payments and tax breaks, and government borrowing in the financial year just ending will be the highest as a share of the economy since World War II.

He was keen to rein back the job-support scheme and unemployment benefit last year before a surge in infections in the autumn forced the government to extend support and belatedly tighten lockdown rules.

The government said in a statement that Sunak would set out more details on his longer-term fiscal plans during next week’s annual budget announcement.

“It is not sustainable to borrow at this current level over the medium term,” the document stated. “This means the government has a responsibility, once the economy recovers, to return to a sustainable fiscal position.”

Source: Al Jazeera

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