The UK’s unemployment rate rose to 5 per cent from September to November 2020 – the highest level of unemployment in five years, according to the Office for National Statistics (ONS).
According to the ONS data there were 418,000 more people unemployed in those three months than during the same period in 2019.
This increase in unemployment has been directly linked to the Covid-19 pandemic and the consequential lockdowns, as many businesses have been forced to close or shut down leading to widespread redundancies.
With lockdowns continuing into the new year across the UK, market commentators say that worsening unemployment stats are still to come.
Laith Khalaf, financial analyst at AJ Bell, said: “Unemployment hit 5 per cent at the back end of last year and unfortunately the renewed lockdown means even more job losses are in the post.
“The unemployment rate was expected to peak this summer, at somewhere around 7.5 per cent, but a lengthening lockdown will have economists tearing up their predictions, and pushing them back, and up.”
These latest statistics still might not be a true reflection of the damage Covid-19 has had on employment, according to Derrick Dunne, chief executive at investment manager Beaufort Investment.
He said the government’s furlough scheme could be softening the true extent of the pandemic’s impact.
Dunne explained: “As if these numbers aren’t worrying enough, they continue to be masked by the ever-extending furlough scheme, so we know the true extent of the damage remains to be seen.
“The chancellor is already predicting that unemployment will surge to 7.5 per cent in the next few months, as struggling firms are forced to make difficult decisions about the fate of their employees. This is just shy of the 8 per cent mark last seen in 2012, and it could go higher still.”
The government’s furlough scheme has aimed to provide economic support to UK businesses during the pandemic, subsidising up to 80 per cent of wages for employees on leave.
The scheme has been extended several times as lockdowns have been repeatedly brought in. It’s currently due to end at the end of April 2021.
But with lockdowns look set to continue Robert Alster, chief investment officer at Close Brothers Asset Management, thinks that the scheme could be extended again.
He said there may be further complications when non-essential businesses are allowed to reopen because there might still be a large portion of the working population yet to receive a Covid-19 vaccine.
As it stands the UK’s vaccine rollout programme is on track to meet its 15 million vaccinations by 15 February target.
According to UK health minister Matt Hancock, one-in-nine UK adults has now received at least one Covid-19 jab.
Alster concluded: “Moving forward, the labour market will need to adapt to long term structural changes in the economy and societal behaviour due to the pandemic.
“The bounce back in employment will not be fast, and will hinge on businesses’ agility in adjusting to unprecedented events becoming the new normal.”