The reopening of the hospitality sector drove a recovery in UK employment in May, with groups that had suffered the biggest job losses since the start of the pandemic experiencing the greatest rebound.
The number of payrolled employees has risen by 197,000 since April, the sixth consecutive monthly increase, the Office for National Statistics said on Tuesday, with the biggest gains among people working in hospitality, young people and those living in London.
The unemployment rate averaged 4.7 per cent over the three months to April, 0.3 percentage points lower than the previous quarter, and the employment rate rose 0.2 percentage points on the quarter to 75.2 per cent.
The ONS said the redundancy rate was now similar to pre-pandemic levels, while hiring was above pre-pandemic levels in most sectors.
Some economists took the figures as confirmation that the UK labour market is on the mend, with employers struggling to recruit rather than looking to cut jobs.
Yael Selfin, chief economist at KPMG, said there could be “increasing challenges to add staff in the coming months, even as the economy’s full reopening is postponed”, while Jonathan Boys, at the CIPD organisation for HR professionals, said the figures showed a recovery was “in full swing” with confidence returning.
However, payrolled employment remains 553,000 jobs short of its level before Covid-19 took hold, underlining the fragility of the labour market as the removal of the remaining restrictions is put on hold.
“The grand reopening in May has led to a grand hiring surge as people return to work . . . But while this hiring surge is welcome, it is far from complete,” said Nye Cominetti, economist at the Resolution Foundation. He estimated the UK’s “Covid employment gap” at almost 3m, after including those still fully or partially furloughed.
Fabrice Montagné, economist at Barclays, said there were “few risks of overheating”, with many people still furloughed, underlying pay growth muted, inactivity high and average working hours well below pre-crisis levels.
Samuel Tombs, at the consultancy Pantheon Macroeconomics, said that despite the pick-up, the labour market would not be strong enough for monetary policymakers to raise interest rates before 2023. He predicted many new vacancies were likely to be filled by self-employed people or by employees furloughed from other businesses, with further job losses likely as the furlough scheme is wound down.
“We understand the value of work and the distress caused by unemployment — that is why we are continuing to support people and jobs,” Rishi Sunak, chancellor, said in response to the figures.
But he faced calls from unions on Monday to extend the furlough scheme in its full form to match the delay to reopening, rather than pressing ahead with the tapering of wage subsidies from next month.
Others argue that while it is time for furlough to end, the government needs to do more to support people who have fallen out of work, with long-term unemployment above 500,000 for the first time in five years. “We need to shift focus to active help for those out of work, not just passive wage support,” said Tony Wilson, director of the Institute for Employment Studies.