UK Edition
Rishi Sunak threw billions more at companies heading back into lockdown last week as the Chancellor - employing his best soothing bedside manner - said it “was right to go further” to meet the economic challenge of a resurgent virus head on.
But the latest miserable jobs figures from the Office for National Statistics beg the question of whether “Dr Sunak” has left it far too late to apply a fresh salve to the nation's struggling labour market.
Then Sunak was talking about “viable jobs”, urging us to “live without fear”, and setting out a much less generous successor to the original furlough scheme that effectively acted as an open invitation for companies to shed staff.
Experimental figures from the ONS suggest they did exactly that. Although the headline rate of unemployment stands at 4.8pc for the July to September period, in the final week of September it actually stood at 5.1pc - suggesting an extra 100,000 people out of work and a jobless count closer to 1.7m than 1.6m.
A record 314,000 surge in redundancies speaks for itself and another 33,000 jobs also dropped off payroll figures in October before the second wave and a return to national lockdown finally pushed Sunak into action.
“Ahead of what was the expected closure of the scheme, employers were already reacting as shown by the sharp spike in the redundancy rate,” warns RBC’s UK economist Cathal Kennedy.
More bad news can also be expected in the months ahead as the redundancy rate continues to rise in next month’s figures before the extension of the furlough until March - at an estimated cost of almost £26bn.
Allan Monks, UK economist at JP Morgan, said the eventual peak in unemployment would be limited by the support but added: “Those extensions came at the eleventh hour and will not have prevented a further rise in job losses at the end of October.”
Institute for Employment Studies director Tony Wilson also suggests the headlines will get a lot worse before they get better for the Government.
He points out that the latest figures - however grim - were actually the good news: “Bear in mind these were the figures for July to September when the economy was reopening."
“The redundancy figures will peak at around 450,000 to 500,000 over the next couple of months and over a six-month period we may get 650,000 to 700,000 redundancies. If we come out of this relatively quickly, we might see a peak [in the unemployment rate] below 7pc,” Wilson warns.
“But if the damage is not felt in unemployment it will be felt in hiring or we might see more involuntary self-employment. We could have a crisis of under-employment rather than unemployment.”
Wilson also points out the slowdown in changing jobs could be a harbinger of a difficult recovery as a bigger share of those still in work bunker down, making it harder for firms to recruit staff.
One of the few bright spots in the latest figures was a relative surge in vacancies among small businesses, but the overall level of company openings also remains more than a third below the pre-pandemic peak, which casts a shadow over prospects early next year - as well as the potential prospect of a no-deal Brexit and the disruption it could bring.
Those fears, though, are set against the “game-changing” news of a 90pc effective Covid-19 vaccine which potentially arrived this week thanks to pharmaceuticals giant Pfizer.
Just days ago the Bank of England forecast unemployment peaking at 7.75pc next year, although its scenario takes no account of a “breakthrough” vaccine moment.
The Centre for Economics and Business Research is bullish on the development and even suggests that unemployment could return to its pre-Covid lows of about 4pc by the end of next year in a “considerably less protracted” labour market recovery.
Economist Sam Miley said: “Some job losses remain on the cards despite this greater optimism, with Brexit uncertainty and changing business viability in light of the pandemic representing just two factors set to prop up the unemployment rate in 2021. Nevertheless, it seems clear that a successful vaccine will drastically soften any labour market damage while also hastening the wider economic recovery.”
But even though the vaccine has been heralded as a crucial development, economists also urge Sunak to resist the temptation to pull the plug on support too soon.
According to Kennedy, now a path to normality is emerging, the case for leaving the furlough in place is “stronger” as more jobs become viable, particularly in hard-hit sectors such as hospitality.
He says: “That’s not to say that every job in those sectors can or will be saved, but rather that a credible route out of having to impose either social distancing measures or rolling lockdowns means that the policy mistake in that scenario would actually be withdrawing support too early.”
Having left it late to support UK businesses this autumn, the pressure is on the Chancellor to avoid a further mistake in the spring.