“Furlough effective in keeping unemployment rate down so far” says Yael Selfin, Chief Economist at KPMG UK.
“Minimal change in April’s headline unemployment rate is good news for UK workers, who have been benefitting from government support schemes. Despite more than a 20% fall in weekly hours worked in April, the unemployment rate remains at pre-COVID levels.
“However, the true impact of the crisis on the labour market is likely to only be revealed once the JRS starts unwinding in the second half of the year. Many businesses are expected to bring only part of their furloughed workers back, while they seek to tentatively reopen after the lockdown. Hiring new workers is also likely to be put on hold for some time.
“This means we could see the rate of unemployment average 11% next year - and the last time it reached these levels was during the recession in the 1980’s. During that slowdown, the rate of unemployment fell by 1.4 percentage points between 1987 and 89, much faster than in the aftermath of the financial crisis. However, even at that rate, the unemployment rate would not return to 5% for over four years this time.”
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