Britain’s labour market failed to improve as much as anticipated in March, confounding economists’ expectations and the results from recent surveys.
Economists remained sanguine nevertheless.
According to the Office for National Statistics, payrolls dropped by 56,000 in March, the first decline in four months.
Employment on the other hand fell by only 73,000 over the three months to February (consensus: 145,000).
The unemployment rate for the quarter ending in February also surprised to the downside, falling by one tenth of a percentage point to 4.9% (consensus: 5.1%), but only as a result of Britons leaving the workforce.
Year-on-year growth in headline average weekly earnings meanwhile slowed from 4.8% to 4.5% (consensus: 4.8%).
However, commenting on Tuesday’s report, Samuel Tombs at Pantheon Macroeconomics described the drop in payrolls as “likely just a blip”.
Tombs argued that the extension of the government’s furlough scheme until September meant firms had no incentive to fire workers at least until July – when they would have to start contributing toward its costs.
The strongest businesses on the other hand were beginning to take on more workers.
March’s rise in the composite employment index in the Markit PMI survey was running at levels consistent with employment strengthening at a year-on-year clip of 1.0%.
The economist also noted the 3.0% quarter-on-quarter improvement in the official measure of job vacancies, which he said was a “positive” sign.
His forecast was for a drop in the rate of unemployment to 4.5% at the height of summer, before the end of furloughs pushed it back above 5.0%.