LONDON (Reuters) – The number of people at work in Britain has suffered the biggest drop since 2009 and signs are growing that the coronavirus will take a heavier toll on the labor market as the government abandons its enormous job protection scheme.
Led by a record dip in self-employment, 220,000 fewer people worked in the three months through June, official figures showed Tuesday.
Separate tax data for July showed that the number of employees on payroll companies since business has fallen by 730,000 since March, sounding the alarm about a potentially much larger increase in unemployment.
Loss of employment is expected as Britain lowers its job-retention scheme, which has handled about one in three jobs in the private sector. It is due at the end of October.
“A real concern is that this is just the first wave of bad news for the labor market,” said Gerwyn Davies, senior labor market adviser at the Chartered Institute of Personnel Development.
“The fact that reduced hiring instead of increasing layoffs of permanent staff is the main cause of job search so far is sickening for the coming months, as more employers turn to layoffs as a last resort.”
Finance Minister Rishi Sunak said the government’s support programs worked but job losses were inevitable.
“I was always clear that we can not protect every job, but … we have a clear plan to protect, support and create jobs to ensure that no one is left without hope,” he said.
A string of company plan layoffs, varying from British Airways (ICAG.L) and the London Evening Standard newspaper to shopkeepers WH Smith (SMWH.L) and Selfridges.
The unemployment rate unexpectedly stood at 3.9%. But that reflected more people who had given up looking for work and were therefore not considered unemployed, and 300,000 people who said they were working but did not get paid, the Office for National Statistics said.
Economists surveyed by Reuters had expected the unemployment rate to rise to 4.2%. Last week, the Bank of England forecast that unemployment would rise to 7.5% by the end of this year.
BoE deputy mayor Dave Ramsden told The Times that the central bank still had “significant headroom” to buy back its enormous bond incentive program as needed.
The ONS is expected to announce on Wednesday that Britain’s economy has fallen into a recession with a 21% drop in the size of the economy in the second quarter.
Tuesday’s figures showed that the number of self-employed in the three months to June fell by a record amount, led by older workers. The number of employees increased – what the ONS said was partly accounted for by workers redistributing themselves as employees.
The number of people applying for universal credit – a benefit for the low-income and the unemployed – rose to 2,689 million in July, up 117% from March.
Payments fell the most in more than 10 years in the period April-June, down 1.2%, reflecting how workers on the payroll scheme receive 80% of their salary. Bonuses exclusive, fell pay for the first time since records began in 2001.
However, there was a slight increase in vacancies in the three months to July as small businesses took on staff to comply with coronavirus guidelines, the ONS said.
Report by William Schomberg, edited by David Milliken, Simon Cameron-Moore, Larry King
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