UK unemployment rate reaches 5.1% as Sunak prepares additional job support

The UK unemployment rate rose to 5.1% in the last three months of 2020, the highest in almost five years, but is still lower than it would have been without the huge coronavirus job support programme that Finance Minister Rishi Sunak looks set to extend next week

Separate data from the Office for National Statistics showed that the number of salaried employees at companies rose by 83,000 in January compared to December, the second monthly increase and the biggest since January 2015.

The unemployment rate – the highest since the first three months of 2016 – was in line with the average forecast by Reuters economists.

Unemployment has been suppressed by the government’s job-preservation programme, which supports about one in five workers.

The programme is the UK’s most expensive economic support measure COVID and will cost around £70 billion ($98 billion) by its scheduled expiry date of 30 April.

But figures based on tax data show that the number of people employed in business has still fallen by 726,000 since February 2020 – equivalent to just over 2% of the workforce – with the majority of job losses suffered by workers under the age of 25.

The Bank of England said it expects the unemployment rate to jump to almost 8% in mid-2021 after the end of the holiday programme.

Sunack is expected to announce an extension of its job support, at least for the sectors hardest hit by the government lockout, in a budget statement on March 3.

“In next week’s budget, I will outline the next phase of our job creation plan and the support we will provide for the remainder of the pandemic and our recovery”, – Sunak said after Tuesday’s data.

Prime Minister Boris Johnson announced on Monday his plan to ease England’s lockdown, which would keep some businesses closed until summer but allow a gradual, earlier opening for others.

“The outlook for the British economy is becoming increasingly clear, and with continued Treasury support it is likely that the Bank of England’s peak unemployment forecast of 7.75% will prove too pessimistic”, –  said John Hudson, fund manager at Premier Miton.

Samuel Tombs of consultancy Pantheon Macroeconomics said he thought the unemployment rate would reach 6% in the summer.

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