May 19, 2020 / 6:23 AM / 10 days ago

UK jobless claims jump to highest since 1996 as COVID hits

LONDON (Reuters) - The number of people claiming unemployment benefits in Britain leapt in April to its highest level in nearly 24 years and the coronavirus hit to jobs is set to deepen in the coming months.

FILE PHOTO: Workers are seen in the More London district, with Tower Bridge behind during the morning rush hour in London, Britain, September 25, 2018. REUTERS/Toby Melville

The claimant count rose by 856,500 - the biggest ever month-on-month jump - to 2.1 million, a 69% increase from March, data published on Tuesday showed.

It was the highest level since July 1996, when Britain’s economy was still recovering from a deep recession caused by its failed bid to stay in the European Exchange Rate Mechanism.

April’s surge would have been even sharper without an emergency government programme to pay 80% of the wages of 8 million employees - or about one-in-four workers - put on temporary leave, who are not counted as unemployed.

Finance minister Rishi Sunak said there would be no immediate bounce-back in the economy, even when the government’s coronavirus shutdown is lifted.

“In all cases, it will take a little bit of time for things to get back to normal,” he told lawmakers

Britain’s work and pensions minister, Therese Coffey, said unemployment would increase significantly.

Recent welfare changes meant the claimant count number included more working people who had suffered a big drop in earnings. But the surge in claims showed the scale of the hit to the labour market.

“While only covering the first weeks of restrictions, our figures show COVID-19 is having a major impact on the labour market,” Jonathan Athow, deputy national statistician at the Office for National Statistics, said.

A Reuters poll of economists had produced a median forecast for a leap of 676,500 in the claimant count, with forecasts ranging widely from just over 56,000 to as high as 1.5 million.

Tej Parikh, chief economist at the Institute of Directors, said the government’s wage subsidy scheme was holding off some job losses for now but it was not clear how firms would react when they are required to help fund it from August.

“Many companies will still be in the middle of a cashflow crisis,” he said.

VACANCIES PLUNGE, PAYROLL TOTAL FALLS

Vacancies fell by the most on record in the February-April period, with hospitality job openings dropping the most.

Tax data showed the number of employees fell by 1.6% in April from March, equivalent to the loss of nearly 450,000 jobs.

George Brown, an economist with Investec, said the claimant count and vacancies figures reflected the situation at the start of April and probably underestimated the hit to the jobs market.

Other data served as a reminder of how strong Britain’s labour market was going into the COVID-19 crisis.

The unemployment rate edged down to 3.9% in the January-March period. Growth in pay slowed but employment expanded by a much stronger-than-expected 211,000.

But with much of the economy shut down by the government, the country’s budget forecasters say unemployment could hit 10% in the April-June period.

Editing by Catherine Evans and Alex Richardson

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