Highest jobless rate in four years takes shine off growth

Forecasters warn that joblessness will rise to its highest rate since 2016 as 100,000 extra people are thrown out of work by Covid-19


Unemployment at a new four-year high of 1.6m will overshadow data revealing record growth this week, as the UK’s prospects wilt under a resurgent pandemic and second lockdown.

Forecasters warn that the jobless rate for the three months to September will rise from 4.5pc to 4.8pc - the highest since 2016 - as an extra 100,000 people are thrown out of work by Covid-19.

Chancellor Rishi Sunak has attempted to stave off a worsening unemployment crisis with the extension of the furlough job protection scheme until March, paying workers 80pc of their salary.

Economists warned however the official figures were underplaying the extent of the crisis, while firms have already moved to lay off droves of employees.

Chris Williamson, chief business economist at financial data firm IHS Markit, said: “The underlying situation is a lot less healthy than the unemployment rate suggests. The timing of the furlough extension has probably come too late for thousands of workers.”

Furloughed workers are not counted as unemployed, but universal credit claims have more than doubled to 2.7m since the pandemic erupted.

Mr Williamson added: “Firms are still cutting staff at a rate we’ve not seen since the Eurozone crisis.”

Despite the jobs gloom, the UK is set to see a record 15.5pc bounce back in output for the three months to September as the economy reopened after a 20pc slump in the lockdown quarter.

But September alone is likely to show fading momentum after the end of the Eat Out to Help Out schem, while the weaker 0.9pc growth pencilled in will still leave the UK almost 9pc below its pre-pandemic peak.

Nomura economist George Buckley said the Bank of England’s hopes that the UK would recover lost ground by 2022 was over optimistic. He said: “This is worse than the depths of any recession we have ever seen, even post-war. It is suggestive that this is a very, very slow recovery.”