Bumpy road ahead: UK bracing for big spike in unemployment

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A woman walks by a closed store, in London, Thursday, July 16, 2020. Unemployment across the U.K. has held steady during the coronavirus lockdown as a result of a government salary support scheme, but there are clear signals emerging that job losses will skyrocket over coming months. The Office for National Statistics said Thursday there were 649,000 fewer people, or 2.2%, on payroll in June when compared with March when the lockdown restrictions were imposed. (AP Photo/Alastair Grant)

LONDON – The U.K. has kept a lid on its unemployment rate so far during the coronavirus pandemic but, scratch beneath the surface, there are worrying trends that will likely see the jobless total soaring by the end of the year.

As department store Debenhams announced another 2,500 job losses on Tuesday, official figures showed that the number of people in paid employment in the April-June quarter fell by the most since the global financial crisis more than a decade go.

That didn’t lead to an automatic increase in the unemployment rate, which held steady at a historically low 3.9% as workers need to be actively looking for a job to be counted as jobless. But as a key government salary support package is being phased out, there are concerns that the number of people officially labeled as unemployed could at least double toward the 3 million mark last struck in the 1980s.

“Some parts of the economy are undoubtedly showing great resilience but clearly there are going to be bumpy months ahead and a long, long way to go,” Prime Minister Boris Johnson said.

The stable jobless rate is largely due to a government salary support scheme that will end in October, a cliff-edge moment that many economists think will lead to an almost immediate doubling in unemployment.

Under the Coronavirus Job Retention Scheme, the government has been paying a large chunk of the salaries of workers retained rather than fired. Some 1.2 million employers have taken advantage of the program during the lockdown to furlough 9.6 million people at a cost to the government of 33.8 billion pounds ($44 billion).

The government has started phasing out the furlough program, with firms now having to cover some of the costs of the plan. The government has said it will end the program in October on the grounds it gives “false hope” to furloughed workers while at the same time limiting their prospects of getting new jobs as their skills fade.

While admitting that not every job can be saved, Treasury chief Rishi Sunak said Tuesday's figures said the support measures, have helped to “safeguard millions of jobs and livelihoods that could otherwise have been lost.”