UK unemployment rate slips unexpectedly to 4.9% in February, but payroll numbers fall ahead of reopening

  • The UK unemployment rate unexpectedly fell to 4.9% in the 3 months to the end of February.
  • But the number of employees on payrolls dropped by 56,000, data showed.
  • The UK is gradually reopening the economy, boosted by a rapid vaccine rollout.
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The UK unemployment rate fell unexpectedly in the three months to the end of February, data showed on Tuesday, ahead of the country’s latest loosening of coronavirus restrictions.

But the number of employees on payrolls fell by 56,000 in March compared to February, painting a mixed picture about the UK jobs market.

Headline unemployment slipped to 4.9% from December to February from 5% in the previous quarter, the Office for National Statistics said.

It beat economists’ expectations of a rise to 5.1%, but analysts said the figure was flattered by a rise in people becoming economically inactive, meaning they had stopped looking for work.

Yet there were some signs of progress in hiring. The number of vacancies for jobs rose nearly 16% in March compared to February, according to experimental data.

The UK economy is gradually reopening from the tough restrictions that were in place from January to March. On April 12, pubs, non-essential stores and hairdressers were allowed to reopen as the vaccine drive picked up speed.

Britain’s government’s furlough scheme currently pays the wages of roughly one in five employees and has been a key reason that the country’s unemployment rate has stayed relatively low, rising only 0.9 percentage points in the year to February 2021.

“The slight fall in the unemployment rate… suggests that the government’s job furlough scheme is still insulating the labor market from the worst effects of the pandemic,” Thomas Pugh, UK economist at Capital Economics, said.

However, economists expect the UK unemployment rate to climb once the furlough scheme is wound down towards the end of the year.

James Smith, developed market economist at ING, said: “Like most economists, we expect the unemployment rate to rise this year.”

He added: “The end of the furlough scheme, and to a lesser extent, a potential increase in inbound UK migration later this year (partly reversing last year’s population fall) are both likely to trigger a temporary spike in the jobless rate to 6-6.5%.”

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