400% Monthly Increase in Benefit Claims Signals Historic Employment Slump Underway

- 1.4 million claim universal credit in March
- 144K companies apply for govt. payroll support
- Cost of Govt. support scheme predicted to be £30BN
- Economy record employment as recently as Feb.

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The jobs market is free-fall, according to analysis of the first real official data of the labour market since the government started rolling out measures to contain the spread of covid-19.

Analysis by the Institute of Employment Studies of Universal Credit data published at 9.30 on Tuesday has shown that new claims increased by at least 400% between February and March.

This is more than five times greater than the previous monthly increase in new claims to unemployment benefits, which was set in July 1994.

In all, 1.4 million people made a claim for Universal Credit in the month of March, dwarfing the average monthly figure of 235 thousand over the previous year.

"Today’s figures show beyond any doubt the scale of the economic shock that we’ve experienced over the last month. These increases dwarf anything that we have seen in at least the last forty years and likely in a lifetime," says Tony Wilson, Director of the Institute for Employment Studies.

Wilson says the data doesn't mean the government should end the lockdown, but it does mean that action is needed on jobs now.

"We can help those out of work to find those jobs that still exist in the economy, and to keep people close to work so that they can get back into work as quickly as possible as the lockdown eases. We’re calling for a ‘Cobra for Jobs’ to bring together government, employers and civil society to help get Britain back to work,” says Wilson.

The call comes after the first day of the rollout of the government's jobs retention scheme that will see the government cover 80% up to £2.5K of the pay of staff furloughed at private companies due to the coronavirus lockdown.

It was reported 144K companies hit by the coronavirus lockdown applied for government support in a single day, ensuring taxpayers will now pay the wages of a million people at a cost of more than £1BN.

The government says employers will receive grants within six days to pay staff.

According to the Times, experts believe the unprecedented intervention will eventually cost the government more than £40 billion and that 8.3 million people could apply.

"We estimate that almost a third of UK employees could be signed up to the scheme disguising the true extent of the increase in unemployment in this first phase of the Coovid-19 crisis," says Cathal Kennedy, European Economist at RBC Capital Markets.

"It now appears as if take-up of that scheme will be more widespread than we previously estimated. Whereas we initially estimated that the scheme would cost around £22bn in total, it now appears as if the cost will be closer to £30bn," adds Kennedy.

The #coronavirus pandemic means that the UK’s labour market is fast-changing.
While our latest labour market data relate to December 2019 to February 2020, we’ve also published articles exploring employment, #COVID19 and different population groups https://t.co/iIZcndjF4w pic.twitter.com/1JJY5tmNgF

— Office for National Statistics (ONS) (@ONS) April 21, 2020

Ahead of the lockdown it was all going so well for the UK jobs market, with official data from the ONS showing UK employment hit a new record in February.

UK employment grew by 172K in the three months to the end of February, taking the total number of individuals in employment to 33.07 million and the employment rate to a fresh record high of 76.6%.

However, the unemployment rate also increased from 3.9% to 4% after the number of individuals classed as unemployed rose from 1.33 million to 1.36 million.

The simultaneous rise in the unemployment and employment rate comes amidst a fall in the inactivity rate to a fresh record low of 20.2%, with around 8.37 million not participating in the labour force.

Yet it is the benefits numbers that economists are interested in as they are the only timely numbers in Tuesday's report that hint at where the labour market is travelling.

"The small crack evident in the latest batch of labour market data may soon turn into a chasm with the unemployment rate rising from 4% to almost 9%," says Paul Dales, chief UK economist at Capital Economics. "There’s not much here to tell us exactly how bad the fallout in the labour market is going to be. But even after taking into account the government’s furlough scheme, our estimate that the economy will contract by 25% suggests that the unemployment rate will soon leap from 4% to almost 9%."