The drop in the number of employees on payrolls indicates scars in the economy after three COVID lockdowns.
The UK labor market has weakened unexpectedly, with corporate payrolls shrinking for the first time in four months and more people leaving the workforce.
The number of employees on the payroll fell by 56,000 in March, the Office for National Statistics said on Tuesday. The unemployment rate fell to 4.9% between the quarter and February, as 80,000 people became economically inactive, indicating that they have stopped looking for work.
The numbers point to scars for the economy from three successive coronavirus lockdowns that have forced most stores, restaurants and entertainment venues to close. These segments have all suffered sharp declines in paid employment despite efforts by Chancellor of the Exchequer Rishi Sunak to protect jobs with vacation pay, leaving overall employment of around 800,000 jobs below what it was before the pandemic.
“The bigger story is the lingering youth crisis,” said Tony Wilson, director of the Institute for Employment Studies. “Long-term youth unemployment hit a five-year high this morning, while youth employment continues to decline even as it begins to rise for all other age groups.”
This month’s figures confuse recent surveys suggesting companies resumed hiring in the weeks leading up to the release of the lockdown. The ONS said the number of job vacancies jumped 16% in March alone to 650,000, which could translate into increased employment in the coming months. Sectors such as hospitality, retail and the arts saw strong increases.
“The job market has remained broadly stable in recent months after the major shock of last spring,” said Darren Morgan, director of economic statistics at the ONS. “With the prospect of businesses reopening, there was a marked increase in vacancies in March, especially in sectors such as hospitality.
Unemployment claims rose 10,100 in March after a revised increase of 67,300 the month before. Growth in base pay, which was inflated by the abandonment of lower-paying jobs in the labor market, was 4.4% in the quarter through February, compared to 4.3% during from the previous three-month period.
The Treasury and the Bank of England expect a rapid recovery from the worst recession in three centuries starting in the middle of the year, when most foreclosure rules are doomed to expire. Stores and restaurants started opening earlier this month.
Employment fell by 73,000 in the February quarter, less than half of the 145,000 drop that economists had anticipated. At the end of February, 4.65 million workers were on leave, up from a peak of 8.8 million at the start of the pandemic in April 2020.
The OBR expects the unemployment rate to peak at 6.5% in the fourth quarter, or around 2.2 million people. This is less than previously estimated and significantly lower than the peak of recessions in previous decades.