Economic bounceback could take time, chancellor warns
Chancellor Rishi Sunak informed a House of Lords committee on Tuesday that it is “not obvious there will be an immediate bounceback” of the UK economy and that it may take time for it to recover to levels seen prior to the Covid-19 pandemic.
In the background, the number of claimants for unemployment benefits was shown to have risen to 2.1 million in April, according to the Office for National Statistics.
April was the first full month of the UK Covid-19 lockdown. Prior to lockdown, which began on March 23, employment levels reached a record high.
The government has made adjustments to eligibility criteria for work-related benefits during the Covid-19 crisis, seeing a spike in Universal Credit claims.
Meanwhile, job vacancies fell by almost 25 per cent to 637,000 in the three months to April.
Work and Pensions secretary Therese Coffey told the BBC that unemployment was likely to increase further, as ONS figures only showed that UK unemployment rose by 50,000 to 1.35 million in the three months to March. The figures, therefore, only account for the first week of the UK lockdown.
Coffey said: "I think we should be prepared for the unemployment rate to increase significantly."
Labour's shadow work and pensions secretary Jonathan Reynolds said that the figures showed "the severity" of the Covid-19 crisis, criticising the levels of support available.
Reynolds said: "Unfortunately, these [benefit] claimants will now discover the UK has one of the weakest out-of-work safety nets in the developed world.
"We support the changes the government has made so far during the outbreak, but they do not match the scale of the crisis."
Jagjit Chadha, director of the National Institute of Economic and Social Research, said that it would be “reasonable” to expect a quick spike in unemployment to over ten per cent in the second quarter.
Tej Parikh, the chief economist at the Institute of Directors, added: "Even before lockdown, coronavirus was threatening to take the shine off the UK's sterling jobs record, and initial estimates for April don't make for easy reading.
"It's clear that, without the government's furlough scheme, the picture would have rapidly deteriorated even further."
People who have been furloughed under the government’s Job Retention Scheme have not been included among the unemployed. However, the level of furloughed employees did have an impact in the total number of weekly hours worked, which saw a sharpest annual decline in a decade for Q1.
The ONS warned that the decline maps solely the fall in the number of hours worked in the final week of March when the lockdown was introduced. Over that week, the total number of hours worked was roughly 25 per cent down on other weeks during the same quarter. The full impact of the wider Covid-19 lockdown in this context is still to be determined.