Unemployment has remained stable despite the end of the furlough scheme in September, the latest figures show.
There was a marginal drop of 0.1 percentage points in the joblessness rate to 4.2 per cent between August and October, marking a relatively painless end to the scheme, which supported more than a million employees during the pandemic.
The number of employees on payrolls has risen to pre-pandemic levels as employers hired 275,000 staff in November, taking the total number of employees to 29.4 million, according to the Office for National Statistics (ONS). Employers created fewer jobs than predicted in the previous quarter, with the number of employees up by 149,000, or 0.5 per cent, compared with the three months to July. Economists had forecast the number to rise by 228,000.
The number of job vacancies rose to a new record of 1.2 million in November.
Average weekly earnings rose by 4.9 per cent year on year in the quarter, exceeding the 4.6 per cent forecast by City analysts.
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Figures for October alone reveal that there was some fallout from the end of furlough. Employment was down by 143,000 that month and there was a 78,000 rise in the number of workers unemployed. However, the impact was short-lived.
The furlough scheme supported 11.6 million jobs and 1.3 million businesses before it came to an end on September 30. A quarter of those who worked as employees between March 2020 and June 2021 were on the furlough scheme at some point.
The unemployment rate is below the 4.4 per cent predicted by the Bank of England in its monetary policy report last month. Maintaining a lower rate of wage growth than inflation into next year will enable the monetary policy committee to raise the bank rate at a slower rate than investors currently expect, according to Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
“The labour market, however, still has just enough slack to prevent wage growth from keeping up with inflation,” he said. “Indeed, October’s 3.8 per cent year-over-year growth rate of average weekly wages excluding bonuses undershot CPI inflation for the first time since June 2020. Admittedly, the main rate of the national living wage will increase by 6.6 per cent in April, and public sector wage growth will pick up now that the pay freeze has ended.”
He said that most companies were managing to control pay rises across the board.
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Martin Beck, chief economic adviser to the EY Item Club, said the survey proved the end of the furlough scheme was benign. “Most other aspects of today’s release pointed to a strong labour market,” he said.
The Bank’s rate setters unsettled markets last month when they voted to keep rates on hold at a low of 0.1 per cent saying that they wanted to see the latest jobs data before considering whether to raise rates to curb inflation. The
Yael Selfin, KPMG UK’s chief economist, said: “The combination of a tight labour market and low unemployment evident in today’s data could on their own be sufficient to merit a rate rise. Nonetheless, with the emergence of the Omicron variant over the recent weeks, we now expect the MPC to unanimously hold off raising rates until next year.”
The monetary policy committee will announce its decision on interest rates and stimulus on Thursday.