Unemployment rate posts a fall

The winding-down of the furlough scheme could lead to an unemployment surge — although thankfully we’re not there yet.

In the latest figures, the unemployment rate was down 0.3 points at 4.7%. Meanwhile, the “economic inactivity” rate was 21.0% (having previously risen by 0.8 points) and the employment rate was up 0.2 points at 75.2%.

However, the movement between furlough and normal work is already affecting average weekly earnings. Total pay leaped by 8.4% across the whole economy, 8.4% in services and 9.4% in the private sector (but slowed to 3.8% in the public sector excluding financial services).

The Office for National Statistics (ONS) says pay growth rates are being affected upwards by a fall in the number and proportion of lower-paid jobs.

But alongside that “compositional effect”, the latest month’s data is now being compared with April 2020 when earnings were first affected by the pandemic. It’s what the ONS calls the “base effect”, and both are affecting earnings figures.

The ONS says the compositional effect is currently 2.5%. However, it was about 1% before the pandemic affected the workforce. So the net impact of recent job losses has been to increase the estimate of average pay by approximately 1.5%.

https://www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/unemployment