UK employment picks up as restrictions ease

The reopening of the hospitality sector drove a recovery in UK employment in May, with groups that had suffered the biggest job losses since the start of the pandemic having the greatest rebound.

The number of payrolled employees has risen by 197,000 since April, the sixth consecutive monthly increase, the Office for National Statistics said, with the biggest gains among people working in accommodation and food services, young people and those living in London.

The unemployment rate averaged 4.7 per cent over the three months to April, 0.3 percentage points lower than the previous quarter, and the employment rate rose 0.2 percentage points on the quarter to 75.2 per cent.

The ONS said the redundancy rate had now dropped on the quarter and was similar to pre-pandemic levels, while hiring was above pre-pandemic levels in most sectors.

Some economists took the figures as confirmation that the labour market is on the mend, with employers struggling to recruit rather than looking to cut jobs.

Yael Selfin, chief economist at KPMG, said there could be “increasing challenges to add staff in the coming months, even as the economy’s full reopening is postponed”, while Jonathan Boys, at the CIPD organisation for HR professionals, said the figures showed a recovery was “in full swing” with confidence returning.

However, payrolled employment remains 553,000 jobs short of its level before Covid-19 took hold, underlining the fragility of the labour market as the removal of the remaining restrictions is put on hold. In the hospitality sector, payroll numbers remained 187,000 lower in May than a year earlier, despite strong gains on the month, with a similar pattern in arts and entertainment.

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“The grand reopening in May has led to a grand hiring surge as people return to work . . . But while this hiring surge is welcome, it is far from complete,” said Nye Cominetti, economist at the Resolution Foundation. He estimated the UK’s “Covid employment gap” at almost 3m, after including those still fully or partially furloughed.

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Samuel Tombs, at the consultancy Pantheon Macroeconomics, said that despite the pick-up, the labour market would not be strong enough for monetary policymakers to raise interest rates before 2023. He predicted many new vacancies were likely to be filled by self-employed people or by employees furloughed from other businesses, with further job losses likely as the furlough scheme is wound down. 

“We understand the value of work and the distress caused by unemployment — that is why we are continuing to support people and jobs,” Rishi Sunak, chancellor, said in response to the figures.

But he faced calls on Monday to extend the furlough scheme in its full form to match the delay to reopening, rather than pressing ahead with the tapering of wage subsidies from next month.

Annual earnings growth has risen sharply, averaging 4.4 per cent in real terms over the three months to April, both including and excluding bonuses. But the ONS said this was partly due to low paid workers falling out of the workforce, with the rate also boosted by the comparison with April 2020, when earnings were hit hard by the start of the pandemic.

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