The U.K. labor market’s latest statistics indicated towards an outdated scenario of domestic strength, given that they largely reflected trends prior to the impacts of the coronavirus being clearly evident in the U.K. In the three months to March, employment rose 210k- stronger than consensus expectations of 30k rise. Meanwhile, the jobless rate dropped surprisingly to 3.9 percent, as compared with consensus expectations of 4.3 percent.
On the face of it, these statistics give little indication of the coronavirus-related malaise that has been seen in other indicators of domestic economic activity and imply that the labor market was in good shape going into the crisis, noted Lloyds Bank in a research report.
“However, it is likely that the headline figures are overstating the health of the UK labour market, particularly with more-timely trends elsewhere in the report painting a more sombre picture, likely to be more evident in the coming months’ reports”, stated Lloyds Bank.
Firstly, the number of unemployed people claiming benefit rose sharply by 856,500 in April, taking the total number to 1.35 million. While these figures also include those claimants that are not actively seeking work, and therefore are slightly overstating the rise in the number of actual ‘jobseekers’, however it still indicates towards the rise in unemployment in the months ahead.
Secondly, the number of vacancies dropped by more than 20 percent to 637k in the three months to April, in line with signs of ebbing demand for labor as large parts of the economy were effectively shutdown last month. Also, the level of employment also includes those employees that have been placed in furlough and is possibly overstating the number of people actually in work.
“Data on the average number of hours worked per week showed a drop of ~1 percent in the three months to March, which is more likely than not due to a significant proportion of the UK labour force being placed on furlough from March. All in all, this suggests that the true health of the UK labour market is overstated by today’s release, with further deterioration likely in the coming months’ reports”, added Lloyds Bank.
