UK job market slumps in the third quarter

UK labor market declined rapidly before the government introduced new support measures, with a record number of staff redundant in Q3 and increase of jobless rate, pointing to the depth of crisis in the sector.

Unemployment jumped to 4.8% in September from 4.5% in August, marking the highest rate since the three months to November 2016.

Redundancies recorded to 314,000 in three months to September, overshooting the Q2 figure by 181,000, while UK employment fell by 164,000, falling sharper than expected 148,000.

Although the claimant count – which measures the change in the number of unemployed people – fell well below expectations (-29.8K in Oct vs 50K f/c) and average earnings rose by 1.3% in Sep from 0.1% in Aug, the outlook for the UK labor market remains grim.

The Bank of England forecasted last week that Britain’s unemployment rate would rise to 6.3% by the end of the year and may peak at nearly 8% in the second quarter of 2021, with the second lockdown set to further slow recovery.

Britain’s Finance Minister Rishi Sunak extended its costly Covid-19 layoff scheme, which provides 80% of the pay of temporarily laid-off workers, until the end of March and promised further financial support, worth billions of pounds, to reassure workers that the government will continue to support them.

The Bank of England expects that around 5.5 million employees will need support during this month’s lockdown, more than double from 2 million in October.