The number of workers on UK payrolls dived more than 600,000 between March and May, official figures suggest.
Meanwhile, the number of people claiming work-related benefits – which includes the unemployed – was up 126% to 2.8 million.
The early estimates reflect the impact of around six weeks of lockdown in which large parts of the UK were shut.
But economists say the full effect on employment will not be felt until wage support schemes end in October.
“The slowdown in the economy is now visibly hitting the labour market, especially in terms of hours worked,” said Jonathan Athow, deputy national statistician for economic statistics at the Office for National Statistics (ONS).
“Early indicators for May show that the number of employees on payrolls were down over 600,000 compared with March.”
He added that the number of people claiming work-related benefits had climbed again, although “not all of these people are necessarily unemployed”.
Overall, the UK unemployment rate held steady at 3.9% in the three months to April as massive wage support schemes brought in by the government prevented job losses.
Reflecting this, the ONS said the total number of weekly hours worked in period had dropped to 959.9 million – down by a record 94.2 million, or 9%, on the previous year.
There was also a record fall in job vacancies between March and May to 476,000 – down 342,000 from the last quarter.
The changes come after large parts of the economy were shut down to fight coronavirus.
However, Capital Economics economist Ruth Gregory warned bigger unemployment rises were on their way.
“It was abundantly clear in every other indicator [other than the headline unemployment rate] that the labour market has weakened dramatically,” she said.
“Despite the apparent stability of the actual unemployment rate, the labour market data were still pretty awful. And some of this will surely start to filter through into the actual unemployment figures as the government’s job furlough scheme is wound down from August.”
Tej Parikh, chief economist at the Institute of Directors, agreed: “The furlough scheme continues to hold off the bulk of job losses, but unemployment is likely to surge in the months ahead.”
‘I’ve applied for more than 100 jobs’
Kayleigh Rennix has never struggled to find work before. The HR manager from Essex was earning close to £40,000 working in the education sector before she resigned in March, fearing her role was at risk.
Since then she’s applied for dozens of jobs, but has had little interest from employers.
“As my leaving date approached, coronavirus reared its ugly head. I would say I’ve applied for more than 100 jobs and not had many call-backs,” she says.
Now the 34-year-old has found herself relying on benefit payments for the first time in her life, and expects to move back in with her parents when her tenancy expires later in the summer.
The Institute of Employment Studies (IES), an apolitical think tank, said the number of people claiming work related benefits had climbed 1.6 million since March, a rate faster than during the Great Depression of 1929.
It said that currently eight unemployed people were chasing every job vacancy in the UK – up from two before the crisis.
It said among the worst hit areas of the UK were:
- Blackpool, where one in eight residents are claiming work related benefits
- Thanet in Kent, where the rate stands at one in eleven
- And Birmingham, where the rate is also one in eleven.
Tony Wilson, director of the IES, said: “If the public health crisis is just starting to ease, today’s figures show that the unemployment crisis is only just beginning.
“It’s clear too that this crisis is hitting many poorer areas hardest – with coastal towns and ex-industrial areas seeing particularly big increases in unemployment.”
In normal times, the employment rate tells you most of what you need to know about jobs.
But these are not normal times.
With the furloughing scheme keeping people employed, if not working, we have to look elsewhere to get a picture of what’s happening.
It’s like building a jigsaw, but with pieces from different boxes: surveys, payroll data, jobs advertised, three-month trends and even looking at week-on-week changes.
The picture it builds is different to the headline employment figure but perhaps not surprising: Serious pressure on jobs during lockdown.
A swathe of businesses have announced job cuts as the economy has sharply contracted due to lockdown including:
- The Restaurant Group, which owns Frankie and Benny’s, which expects to cut up to 3,000 workers
- The UK’s biggest builders’ merchant, Travis Perkins, which plans to cut about 2,500 jobs, or 9% of its workforce.
- British Airways, which expects to cut 12,000 jobs
- BP, which is slashing 10,000 jobs worldwide
- And British Gas owner Centrica which is cutting 5,000 positions.
Last week, the ONS revealed the UK economy shrank by a 20.4% in April – the largest monthly contraction on record – as the country spent its first full month in lockdown.
That is three times greater than the decline seen during the whole of the 2008 to 2009 economic downturn.
Meanwhile, a total of 9.1 million workers are on furlough, according to the latest figures from HMRC published on Tuesday.
This means more than a quarter of the UK workforce are having 80% of their monthly wages, up to £2,500, paid by the government, while they are temporarily off work. Their employer, which chooses whether or not to furlough workers, can top up the remaining 20% if it wishes.
The cost to the state so far has been £20.8bn.
The figures come as the TUC union body calls for a long-term job guarantee scheme to assist, particularly younger, workers who face losing their jobs.
The Treasury also said there had been 2.6 million claims for support grants from the self-employed, at a cost of £7.6bn.