UK unemployment rate jumps to 4.5%; IMF warns of polarised labour markets - as it happened

Graeme Wearden

from on 2020-10-13 15:45 (#59253)

Rolling coverage of the latest economic and financial news, as UK unemployment hits a three-year high.. with worse to come

Latest: IMF's GDP forecasts
Full story: Record rise in redundancies in last quarter
Intro: UK jobless rate hits 4.5% in June-August - a three-year high
Redundancies jump; employment falls; young workers hit
Sunak: Can't save every job

4.45pm BST

And finally... European stock markets have all closed lower.

We can't blame Ronaldo, though. Instead, jitters about the global economy seem to be weighing on stocks again.

Sentiment has gone from bad to worse today as traders are worried about the health crisis. The number of new coronavirus cases has stoked fears about stricter restrictions, and that has impacted market confidence as economic activity could take a hit.

Earlier today, the IMF revised upward its growth outlook for the world economy for this year but that hasn't stopped the decline in European equities. The body now thinks the global economy will shrink by 4.4% in 2020, and keep in mind, the update in June predicted an economic contraction of 4.9%. With respect to 2021, the IMF now anticipates growth of 5.2%, down from 5.4% in a prior update.

4.40pm BST

Jobs worries are casting a shadow over UK carmaker Jaguar Land Rover, my colleague Jasper Jolly explains:

Jaguar Land Rover is lagging way behind rival UK carmakers in its recovery from the pandemic, with 3,000 workers still furloughed and a key factory running at only a fraction of capacity, according to confidential production plans.

Every UK car factory shut its doors in March as the UK's coronavirus lockdown began, and manufacturers relied heavily on the coronavirus job retention scheme, which supported the salaries of furloughed workers.

4.22pm BST

Over in Milan, shares in Juventus have slid over 2.5% to their lowest level since April after their star forward, Cristiano Ronaldo tested positive for coronavirus.

Juventus shares plunge to a six- month low after Ronaldo tests positive pic.twitter.com/LYg75egvKx

3.56pm BST

Mark Carney's successor, meanwhile, reckons Britain's economy is not enjoying the fabled V-shaped recovery....

Reuters has the details:

Bank of England Governor Andrew Bailey said he did not think the economy was undergoing a sharp, V-shaped recovery, because of headwinds from a second wave of COVID and underlying public caution about spending and socialising after the pandemic.

A V' is really not the way I look at it in terms of what we face going ahead," Bailey told the House of Lords' Economic Affairs Committee. The recovery will take time."

3.08pm BST

Former Bank of England governor Mark Carney has had an interesting idea -- bankers pay should be linked to their efforts fighting the climate emergency.

Such a move would help align the finance industry with Paris climate goals, my colleague Kalyeena Makortoff reports.

have some interim objectives and targets that are disclosed. Ideally a governance process that's clear in terms of ... specific board-level governance and responsibility around managing climate risks and opportunities.

Ideally, [there should be] some compensation link to that as well, or at least disclosure about whether it is there or not."

2.41pm BST

Anxiety over Covid-19, and the US election, has led to a cautious start to trading in New York.

The Dow Jones industrial has dipped by 58 points, or 0.2%, to 28,779 while the Nasdaq opened around 0.2% lower.

2.19pm BST

The IMF's eye-watering forecast is that the final bill for the pandemic would total $28tn (21.5tn) in lost output.

2.17pm BST

Even with today's improved forecasts, the global economy is still suffering its worst slump since the Great Depression.

The IMF says global policymakers need to do three things, to protect the global economy from Covid-19: Work together on health treatments; provide money to protect jobs and business; and build greener, more progressive economies.

Tremendous progress is being made in developing tests, treatments and vaccines, but only if countries work closely together will there be enough production and widespread distribution to all parts of the world. We estimate that if medical solutions can be made available faster and more widely relative to our baseline, it could lead to a cumulative increase in global income of almost $9 trillion by end-2025, raising incomes in all countries and reducing income divergence.

Governments should continue to provide income support through well targeted cash transfers, wage subsidies, and unemployment insurance. To prevent large scale bankruptcies and ensure workers can return to productive jobs, vulnerable but viable firms should continue to receive support-wherever possible-through tax deferrals, moratoria on debt service, and equity-like injections.

Over time, as the recovery strengthens, policies should shift to facilitating reallocation of workers from sectors likely to shrink on a long-term basis (travel) to growing sectors (e-commerce). Workers should be supported through this adjustment with income transfers, retraining, and reskilling. .

In the future, governments will likely need to raise the progressivity of their taxes while ensuring that corporations pay their fair share of taxes, alongside eliminating wasteful spending.

Investments in health, digital infrastructure, green infrastructure, and education can help achieve productive, inclusive, and sustainable growth. And expanding the safety net where gaps exist can ensure the most vulnerable are protected while supporting near-term activity.

1.49pm BST

Despite raising its 2020 growth forecasts a few minutes ago, the IMF is deeply worried about the damage caused by Covid-19.

The Fund's chief economist, Gita Gopinath, writes that the global economy faces a long, uneven and uncertain ascent.

As a result of eased lockdowns and the rapid deployment of policy support at an unprecedented scale by central banks and governments around the world, the global economy is coming back from the depths of its collapse in the first half of this year. Employment has partially rebounded after having plummeted during the peak of the crisis.

This crisis is however far from over. Employment remains well below pre-pandemic levels and the labor market has become more polarized with low-income workers, youth, and women being harder hit. The poor are getting poorer with close to 90 million people expected to fall into extreme deprivation this year. The ascent out of this calamity is likely to be long, uneven, and highly uncertain. It is essential that fiscal and monetary policy support are not prematurely withdrawn, as best possible.

This crisis will likely leave scars well into the medium term as labor markets take time to heal, investment is held back by uncertainty and balance sheet problems, and lost schooling impairs human capital.

After the rebound in 2021, global growth is expected to gradually slow to about 3.5 percent into the medium term. The cumulative loss in output relative to the pre-pandemic projected path is projected to grow from 11 trillion over 2020-21 to 28 trillion over 2020-25. This represents a severe setback to the improvement in average living standards across all country groups.

1.47pm BST

Here are the IMF's latest forecasts for the global economy, and the recovery from Covid-19:

1.39pm BST

Just in: The International Monetary Fund has upgraded its GDP forecasts for this year, predicting a less severe recession.

In its latest World Economic Outlook, the IMF predicts global output will fall by 4.4% in 2020, better than the 5.2% slump forecast back in June.

1.18pm BST

Here's our story the jump in alcohol sales last month, as UK households adjust to the latest lockdown restrictions:

1.17pm BST

Ikea is to buy back its unwanted furniture from customers to resell as secondhand as part of the Swedish group's efforts to become more environmentally friendly.

The Buy Back initiative will be launched in Ikea stores across the UK and Ireland on 27 November - the Black Friday discount day. Customers will receive vouchers to spend in store, with their value calculated according to the condition of the items returned.

1.06pm BST

Professor Costas Milas of University of Liverpool has created this neat chart, showing how the UK claimant count jumped as soon as lockdown measures were imposed - and has kept rising.

The UK claimant count already took off in April (full lockdown) and continued to rise even as stringency measures were somewhat relaxed.

The point is that the UK unemployment rate will catch up and both will keep rising for as long as stringency measures remain above the pre-pandemic era.

12.38pm BST

Readers may remember that during the 1992 election, the Conservative Party ran adverts claiming the Labour Party would hit Britain with a double whammy' of tax rises and higher prices.

It helped John Major to a surprise victory over Neil Kinnock (followed by Black Wednesday, endless rows over the Maastricht Treaty, and the cones hotline)

Redundancies in the UK jobs market have spiked, following a very similar trajectory to that seen in the last financial crisis, with 114,000 jobs lost between June and August.

The overall unemployment rate rose to 4.5%, an interim high since 2017 but this rate is likely to go much higher yet in spite of the 673,000 drop in payrolls since March. It appears that the furlough extension seems to have come too late for many UK firms who have slashed positions in the last few months.

11.24am BST

The Resolution Foundation thinktank have pulled together a nice thread of the main points in today's UK unemployment report. Here are some highlights:

In the three months to August, the 16+ unemployment rate rose to 4.5%, up from 4.3% and 4.1% in the two months before that. This was a rise of 138k on the previous quarter, the largest rise since 2009. pic.twitter.com/TCKEgtFrL4

So far, the crisis has mostly shown up in falls in hours worked, rather than employment. Hours recovered slightly in the three months to August - rising by 2.3% compared to the three months to May - but remained 15% down compared to a year earlier. pic.twitter.com/3L40BgE5Yf

On sectors, the story is much the same as in recent months, with big sectoral variation, and very low postings in leisure and some other hard-hit sectors. Construction, by contrast, is posting vacancies at the same level as pre-pandemic. pic.twitter.com/eOTNHCSCcF

But not all sectors have seen pay growth. Pay in the hospitality sector has fallen by 6.8%, as many workers remained on the 80% of pay covered by the Job Retention Scheme in August. pic.twitter.com/AQyFl3U9I2

New @ONS labour market stats today for the 1st time has real time information on employee growth by region. Every part of the country has seen jobs growth plummet but London appears to be having a particularly torrid time pic.twitter.com/UdQAK1R89f

11.21am BST

If you're just tuning in, here's Jonathan Athow, the ONS's deputy national statistician, summed up this morning's UK jobless figures:

Since the start of the pandemic there has been a sharp increase in those out of work and job hunting but more people telling us they are not actively looking for work,"

There has also been a stark rise in the number of people who have recently been made redundant."

10.49am BST

Sales of wine and beer at UK supermarkets jumped sharply last month as the government introduced early closing time at bars and restaurants.

Market research group Kantar reports that alcohol sales at grocers jumped by 261m in September, compared to a year ago -- as the 10pm curfew was imposed.

People spent an extra 261 million on booze to drink at home after the 10pm curfew was introduced last month. Be interested in how many cases of wine & beer were ordered on the eve of announcement.
Online sales continue to grow by 76% - this trend is here to stay

10.18am BST

Economic anxiety is also rising in Germany, a new survey shows.

Investor sentiment in Europe's largest economy has fallen this month, and by more than expected, in the face of rising Covid-19 cases.

#Germany ZEW survey expectations component shows that the optimistic take on the economic outlook over the summer is fading. Added uncertainty surrounding the recovery now, another one for the #ECB to digest. pic.twitter.com/rXNpRyfg87

The recent sharp rise in the number of COVID-19 cases has increased uncertainty about future economic development, as has the prospect of the UK leaving the EU without a trade deal."

10.12am BST

Our economics editor Larry Elliott has analysed today's labour market report -- and concluded that there's a lot more bad news to come...

The latest jobless figures were not all doom and gloom. Vacancies were up by nearly 150,000 between the second and third quarters and 20,000 people were added to payrolls in September.

These, though, were silver linings to a whopping cloud. The big picture is that unemployment is going up while employment and participation in the labour market are going down.

10.01am BST

Earlier, I mentioned the record fall in 18-24 year olds in work over the summer.

That's probably due to a range of factors. Obviously, opportunities at restaurants, pubs and shops are limited by lockdown restrictions. Also, the ONS reported last week that 86% of companies were trading in September - the remainder are unlikely to be hiring many new starters.

The new figures published today by the ONS further demonstrate the severity of the unemployment problem we are facing in the wake of Covid-19.

Today's new statistics reveal that the number of employees in the UK on payrolls is now down around 673,000 compared with March 2020. What's more, redundancies have reached the highest level since May to July 2009, in the midst of the last global recession. More worryingly still, recent patterns demonstrate that this problem has impacted the nation's young people disproportionately. The Resolution Foundation has recently warned that youth unemployment could rise to around 17%, the same level as the early 1980s peak - we therefore urgently need to do more to help young people. We need to see further decisive action from the Government to reverse the huge falls in employment resulting from the recent shock of the pandemic."

9.24am BST

Here's Anneliese Dodds MP, Labour's Shadow Chancellor, on the record jump in redundancies that pushed Britain's unemployment total up:

Today's redundancy data is deeply concerning. Sadly, more people are going to lose their jobs until the Government gets a grip. That means fixing test, trace and isolate, putting in place a proper Job Recovery Scheme and making clear, consistent and fair funding available to local areas as soon as restrictions are applied.

The Chancellor's chaotic habit of trying to fix problems of his own making at the last possible minute risks unemployment spiralling to levels we haven't seen in decades."

9.16am BST

Here's our economics correspondent Richard Partington on this morning's UK jobless report:

The number of redundancies in the UK has risen at the fastest rate since records began as the economic fallout from Covid-19 and scaling-back of the government's furlough scheme drives up unemployment.

The Office for National Statistics said 227,000 redundancies were made in the three months to August, an increase of 114,000 from the level in June and the fastest rise on record.

9.07am BST

ING economist James Smith believes the UK jobless rate could hit 10% this winter - which would be the highest since the 1993 recession.

He told clients:

With new Covid-19 restrictions across the UK, there can be little doubt that challenges facing the jobs market are mounting. The latest labour market figures continue to show further signs of strain. While the unemployment rate remained pretty low at 4.5% for the three months to August, there are clear questions (as highlighted by the ONS this month) as to how useful this metric is at the moment.

Instead, we need to look at the more real-time data from payrolls, which shows that there were still roughly 670,000 fewer employees than before lockdown in March. Unfortunately, things are unlikely to improve in the near-term, and the combined impact of renewed business closures and the end of the original furlough scheme is likely to push the unemployment rate considerably higher into year-end."

Many, many operators are on their knees."

8.35am BST

This tweet from the TUC shows how the UK jobless rate has pushed higher, while the employment total is dropping.

The latest quarter (Jun-Aug 2020) saw a drop in the employment rate compared to the same period last year (down from 75.9% to 75.6%) and a rise in the unemployment rate (up from 3.9% to 4.5%). pic.twitter.com/wtltpP1s1z

8.27am BST

Kalum Pickering of Berenberg Bank predicts that the UK's unemployment rate will soar once Rishi Sunak's furlough scheme ends this month.

He estimates it could hit 8% - or double its level before the pandemic:

Unlike in the US, furloughed workers in the UK who receive support via the government's CJRS (Coronavirus Jobs Retention Scheme) are classed as employed. This distorts the underlying picture. Once the CJRS expires on 31 October, we expect a wave of layoffs across the UK to push the unemployment rate temporarily above 8.0% during Q4 2020, falling thereafter in line with the economic rebound.

While recent policy initiatives such as the Job Support Scheme and the local furlough schemes to support workers in businesses that are forced to close due to regional restrictions will continue to support employment, they are unlikely to fully offset the forthcoming jump in layoffs once the CJRS ends.

8.20am BST

Tony Wilson, director of the Institute for Employment Studies, predicts that more people will be made redundant during the Covid-19 pandemic than in the 2009 recession after the financial crisis.

Redundancies are growing at their fastest ever rate, doubling in the last three months alone. This morning's figures confirm that redundancies will peak higher in this recession than they did in the last crisis, and we're still forecasting that there'll be at least six hundred thousand lay-offs by the end of year.

So unfortunately the worst may well still be ahead of us. Revisions to earlier estimates also show that the official measure of employment has fallen by nearly half a million since the pandemic began, which is the fastest fall in employment since 2009. This is now starting to feed through into higher unemployment, which again is going to continue to rise through the autumn.

Wow so I think that this will be the graph of the morning. Redundancies have shot up (again): they've doubled in a quarter. Fastest growth since the series began in 1995.
Left shows level of redunds, right shows quarterly growth
1/2 pic.twitter.com/a2iqOZsqeo

8.10am BST

TUC general secretary Frances O'Grady is urging Rishi Sunak to bolster his wage subsidy schemes:

We are on the precipice of an unemployment crisis. Ministers must act now to protect and create jobs. The expansion of the job support scheme is a step in the right direction, but it still falls short.

Wage replacement should be 80% for businesses who have to shut. We need a more generous short-time working scheme for firms which aren't required to close but will be hit by stricter local restrictions. And self-employed people in local lockdown areas need help too.

8.01am BST

Chancellor of the Exchequer, Rishi Sunak, has suggested that people who lose their jobs during the pandemic should consider retraining, or apprenticeships.

Responding to today's jobless figures, Sunak says:

I've been honest with people from the start that we would unfortunately not be able to save every job. But these aren't just statistics, they are people's lives. That's why trying to protect as many jobs as possible and to helping those who lose their job back into employment, is my absolute priority.

This is why we put together an unprecedented 190bn package of support and have a comprehensive Plan for Jobs. Our measures have focused on protecting people's livelihoods, which is what the furlough scheme has done and what our support schemes - including SEISS, the Job Support Scheme and Job Retention Bonus - continue to do.

7.57am BST

Alarmingly, there was a record slump in the number of younger people in work over the summer.

That's a clear, worrying sign that Covid-19 is hurting people early in their careers, or making it much harder to get into the jobs market at all.

Those aged 16 to 24 years decreased by 220,000 to a record low of 3.54 million (with a record decrease of 191,000 for those aged 18 to 24 years), while those aged 65 years and over decreased by 24,000 to 1.28 million.

In contrast, there was a combined increase of 92,000 on the quarter for those aged 25 to 64 years, to 27.77 million (with women in the 25 to 34 years age group at a record high of 3.61 million).

7.46am BST

The Office of National Statistics also estimates that the slump in UK payrolls may have stopped last month, after heavy falls earlier in the pandemic.

It says:

Early estimates for September 2020 suggest that there is little change in the number of payroll employees in the UK; up 20,000 compared with August 2020.

Since March 2020, the number of payroll employees has fallen by 673,000; however, the larger falls were seen at the start of the coronavirus (COVID-19) pandemic.

7.33am BST

The number of people made redundant from their job in the UK jumped at a record rate over the summer, driving the unemployment rate up.

The ONS says:

Redundancies increased by 113,000 on the year, and a record 114,000 on the quarter, to 227,000.

The annual increase was the largest since April to June 2009, with the number of redundancies reaching its highest level since May to July 2009.

7.30am BST

Today's labour force report is a grim read.

On employment, it shows that the number of people in work fell by over 150,000 in the last quarter, to below 32.6 million. This pulled the employment rate down from 75.9% to 75.6%.

Estimates for June to August 2020 show 32.59 million people aged 16 years and over in employment, 102,000 fewer than a year earlier. This annual decrease was driven by men in employment (down by 213,000 on the year to 17.04 million).

Employment decreased by 153,000 on the quarter; men in employment decreased by 115,000, while women in employment decreased by 38,000. This quarterly decrease was driven by people in employment aged 16 to 24 years, the self-employed and part-time workers, but was partly offset by increases in employment for people aged 25 to 64 years and full-time employees.

7.17am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Unemployment in the UK is rising at the fastest pace since the aftermath of the financial crisis, as the Covid-19 pandemic continues to hurt the economy, costing more people their jobs.

The annual increase was the largest since September to November 2011 and the quarterly increase was the largest since May to July 2009.

What's the forecast for the global economy? Join us tomorrow, October 13 at 8:30am EDT for the release of the October 2020 World Economic Outlook by @GitaGopinath. #WEO https://t.co/XMCO1emJHw pic.twitter.com/FDLV2WeLNC

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