U.K. employment falls in three months to June, jobless rate remains at 3.9 pct

The latest U.K. labor market statistics gave slight indication of the coronavirus-related malaise that has been seen in other indicators of domestic activity, especially with tomorrow’s GDP report likely to show that the economic output dropped around 20 percent over the same period, noted Lloyds Bank in a research report. Today’s report showed that the jobless rate remained at 3.9 percent.

Nevertheless, it is evident that the headline figures are overstating the health of the U.K. labor market, especially with more-timely data elsewhere in the report painting a more sombre picture. In the three months to June, the number of people in employment dropped 220,000.

The fact that the jobless rate did not rise, in spite of a 220,000 fall in employment was because of a 300,000 rise in inactivity- the number of people out of work but currently not looking for work. For a person to be classes as unemployed, they must be available to being within the next two weeks.

This implies that there has been a considerable rise in the number of people choosing not to participate in the labor market, which is thus flattering the official unemployment rate. Furthermore, the number of vacancies dropped by more than 40 percent to 370k in the three months to July, in line with signs of faltering demand for labor.

Markedly, the employment figures include those employees that have been placed in furlough and so is likely to be overstating the number of people actually in work. Accordingly, data on the total number of weekly hours worked throughout the economy indicated a fall of 18.4 percent in the second quarter.

“All in all, this suggests that the true health of the UK labour market continues to be overstated by the headlines from today’s release, and a deterioration is likely in the coming months, particularly with the Job Retention Scheme being wound down from this month. The BoE expects most furloughed staff to return to employment, but it nevertheless sees the unemployment rate rising to around 7.5 percent by the end of the year”, added Lloyds Bank.