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Economists monitor job landscape as support ends

By Jonathan Powell in London | China Daily Global | Updated: 2021-10-01 17:24
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A person looks at the adverts in the window of a job agency in London, Britain Oct 13, 2020. [Photo/Agencies]

Economists will pay close attention to unemployment data in the United Kingdom after the nation's furlough job retention program ended on Thursday.

The unprecedented program, which has run for 18 months and supported up to 9 million people at the height of the COVID-19 pandemic last year, aimed to prevent job losses and support household spending through the crisis.

Officially known as the Coronavirus Job Retention Scheme, it is reported to have cost the government up to 70 billion pounds ($94 billion), and is credited with keeping unemployment rates down.

The jobless rate was last measured at 4.6 percent and the Treasury has predicted it will rise to 5.2 percent in the fourth quarter of this year.

The Financial Times said surveys suggest that one million people furloughed from sectors, such as aviation, tourism and the cultural sector, were still reliant on the program as it closed.

It noted a warning the Institute for Fiscal Studies, saying workers in London were most vulnerable to long-term unemployment as the capital had higher furlough rates and lower vacancy rates. Older workers made redundant may also struggle to find new work, it said.

The Centre for London think-tank warned that there needed to be a "concerted effort' to stop the city becoming the "unemployment capital of the UK".

The UK economy faces continuing pressure with inflation set to rise further above its target in the short term. The Bank of England is understood to be waiting to assess how the end of the furlough program impacts the job landscape before it considers raising interests rates, the paper said.

The BBC quoted Fidelity International's investment director, Maike Currie, as saying that "no one really knows what is next". "I think what we can be certain of is that we'll see under-employment, where employees return to work but possibly not on a full-time basis and that they might need to supplement their income."

Britain's economic rebound grew faster than previously thought in the second quarter as COVID-19 pandemic restrictions were lifted, according to official figures.

The Office for National Statistics, or ONS, said gross domestic product increased by 5.5 percent between April and June after being revised up from the initial estimate of 4.8 percent.

"The economy grew more in the second quarter than previously estimated, with the latest data showing health services and the arts performing better than initially thought," said ONS deputy national statistician, Jonathan Athow, in a news release.

The ONS said the biggest driver of the upward GDP revision was household spending after rules were eased to allow outdoor dining in April, with further measures lifted in May.

Ruth Gregory, senior UK economist at Capital Economics, told the FT that the revision "raises the risk that the Bank of England will hike interest rates sooner than our forecast of May 2022".

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, noted that the upward revision brings the UK economy's performance "in line with other G7 economies".

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