Vaccine Unlikely to Halt Unemployment as U.K. Job Losses Reach Record High

More than 782,000 people lost their jobs between March and October in the United Kingdom, new official figures have shown. The unemployment rate continues to surge, rising to 4.8 percent in the three months to September, up from 4.5 percent, as coronavirus continued to hit the jobs market.

In the past month alone, 33,000 people lost their jobs, pushing the unemployment rate up 0.9 percentage points on a year earlier, according to the Office for National Statistics (ONS).

Redundancies rose to a record high of 314,000 in the three months to September, as companies let workers go in anticipation of the end of the British government's furlough scheme, which paid a percentage of salaries, and was originally supposed to finish at the end of October.

It has now been extended until the end of March 2021, with employees who cannot work getting up to 80 percent of their salaries, but analysts say the extension came "too late in the day", anticipating further big rises in unemployment in the coming months.

Mariano Mamertino, senior economist for Europe at LinkedIn tells Newsweek that claims the COVID vaccine from U.S. pharmaceutical company Pfizer in collaboration with Germany's BioNTech firm is more than 90 percent effective in preventing COVID-19 is welcome "but we're not out of the woods yet."

"There is still a lot of uncertainty around the timings, as well as the production and distribution of the vaccine," Mamertino says. Confidence among employers, especially for those in the hardest-hit sectors like hospitality, high-street retail or travel, will get a real boost once we have more certainty on those issues. Once the economy opens back up, it will still take some time for the labor market to fully recover and, even when it does, it will probably look different."

LinkedIn saw competition for jobs peak in June and since then competition has started to ease thanks to a steady increase in roles being advertised.

"The picture for job seekers is better than we saw at the height of the first wave, but the reality is that competition for jobs in October was still 33 percent higher than a year ago," Mamertino says. "We're keeping a close eye on the impact the second wave of the virus is having, as it's possible this will make the picture more challenging."

England, like many countries across Europe, is in the midst of a second COVID lockdown, with Scotland, Wales, and Northern Ireland applying their own restrictions on the public.

Will the positive news of a potential vaccine on the horizon be enough to counteract the hit from a second lockdown on the jobs market? With the December 31 Brexit transition end date fast approaching and the extension of furlough potentially masking the true scale of jobs lost to the pandemic, Mamertino is unsure.

A man walks past closed shops London
A man walks past closed shops in London as Britain's unemployment rate jumped to 4.8 percent amid the COVID pandemic Tolga Akmen/Getty

"There is a high degree of uncertainty surrounding the first few months of 2021," he says. "The tapering of the furlough scheme next March is likely to put additional strain on an already challenging labor market outlook. Containing the virus is the key to improving labor markets and so positive news of a vaccine is something we can celebrate."

Dave Innes, head of economics at the poverty charity Joseph Rowntree Foundation, said the "eleventh-hour decision" to extend furlough to 2021 "will have cost jobs and will give little comfort to those who have already been made redundant" with Christmas on the way. "The poorest are being hit hardest too," he said. "Low-paid workers are more likely to work in sectors where jobs are most at risk."

Suren Thiru, the head of economics at the British Chambers of Commerce, expects unemployment to rise further still. "With firms facing another wave of severely diminished cash flow and revenue and with gaps in government support persisting, further substantial rises in unemployment remain likely in the coming months," Thiru said.

ONS deputy national statistician for economic statistics Jonathan Athow said unemployment grew sharply in the three months to September as people who lost their jobs earlier in the pandemic started looking for work again. "Vacancies continued to recover from the very low numbers seen earlier in the year but these figures predate the reintroduction of restrictions in many parts of the UK," he said.

Jack Kennedy, UK economist at the global job site Indeed, said the pain of job losses is being felt unevenly - with the youngest being hardest hit. "During the last quarter, the number of 16 to 24-year-olds in work plunged by 174,000 to reach its lowest ever level," he said.

"Yet there are some encouraging signs in this jobs report. Nearly a quarter of a million people have returned to the labor market, in the largest net flow from economic inactivity to unemployment on record. Most encouraging of all are the signs that employers are hiring again. In the three months to October, there were more than half a million vacancies across the UK - a jump of 146,000 in the previous quarter. For all its progress, the jobs market remains well adrift from where it should be at this time of year."

Kennedy said the number of job postings on Indeed last week was 44% down on this time in 2019. "Looking ahead the big question is whether England's second lockdown will erode the gains," he said. "The eleventh-hour reprieve of the furlough scheme, which was extended just hours before it was due to expire at the end of October, has scattered some extra cushions on what is still sure to be an extremely rocky road ahead."