Unemployment in the UK fell for a second month in February despite the Covid-19 lockdown, as employers stepped up preparations for the easing of restrictions this spring.
The Office for National Statistics said the unemployment rate fell to 4.9% in the three months to February, representing about 1.7 million people, in a modest improvement from 5% in the three months to January.
The improvement reflects more stable conditions after the fastest growth in redundancies on record last year, with young people suffering the worst of the jobs damage triggered by the Covid recession.
In a sign of employers stepping up plans for the easing of lockdown in England and Wales on 12 April, early indicators for March and the first weeks of April pointed to rising numbers of job adverts placed online as employers in the hospitality sector started to hire workers.
However, the picture of strength emerging in the jobs market comes with as many as 4.7m jobs furloughed at the end of February according to separate figures from HMRC, as the multibillion-pound emergency wage scheme prevents a higher rate of unemployment while the economy remains under pressure.
At a rate of 4.9%, the official figures show about 1.7 million people were unemployed in the three months to February. Rishi Sunak, the chancellor, said protecting jobs and the economy was his main focus during the pandemic.
“As we progress on our roadmap to recovery I will continue to put people at the heart of the government’s response through our plan for jobs – supporting and creating jobs across the country,” he said.
However, economists warned that the unemployment rate was likely to climb after furlough is made less generous this summer and removed entirely from the end of September.
Suren Thiru, the head of economics at the British Chambers of Commerce, said there were signs that longer-term unemployment caused by Covid-19 would persist, particularly for young people.
This “may mean that the road back to pre-pandemic levels lags behind the wider economic recovery”, he said.
“Further action will be needed to support the labour market when the furlough scheme ends, including supporting businesses to recruit and retain staff through a temporary cut in employer national insurance contributions.”
Despite the decline in the headline jobless rate, employment – which measures the number of people in work – fell slightly, by 73,000 in the three months to the end of February, in a sign that the jobs market is stabilising but not yet managing to create significantly higher numbers of opportunities.
Early indicators from HMRC showed a fall in the number of employees on company payrolls in March, of about 56,000, in the first decline since November 2020. The number of workers on company payrolls has plunged by 813,000 over the past year.
Young workers have been hit hardest during the crisis, with those under the age of 35 accounting for almost 80% of the decline in payrolled employees.
The ONS said employment among 18- to 24-year-olds continued to fall, dropping by 5.1 percentage points on the quarter, while there was a further rise in young people moving into economic inactivity, meaning they stopped looking for work. Experts said this reflected a lack of opportunities during lockdown, and warned more action was required to help those at the start of their careers.
Frances O’Grady, the general secretary of the TUC, said urgent action was necessary from the government to support the jobs recovery as Covid-19 restrictions were eased, including a reboot of the £2bn kickstart jobs scheme, which provides job placements for under-25s.
“Young workers are bearing the brunt of this pandemic. Many of them working in badly hit industries like retail, hospitality and the arts have lost their jobs and are at risk of long-term unemployment,” she said.
Economists said there were promising signs for the jobs outlook from a 16% rise in job vacancies in March, as employers started hiring in preparation for the easing of Covid-19 restrictions amid hopes there would be pent-up consumer demand.
However, concerns remain that any renewed growth in coronavirus infections and a return to tougher restrictions would derail the jobs market recovery. Tej Parikh, chief economist at the Institute of Directors, said: “The economy is not out of the woods yet, and the government should remain prepared to extend support if the roadmap meets speedbumps.
“Meanwhile, it is important that retraining and upskilling schemes hit the ground running to help workers find new opportunities in the post-pandemic economy.”