Britain’s jobless rate has fallen for the first time since the pandemic struck, despite the latest lockdown shutting large parts of the economy, according to official figures.
The Office for National Statistics (ONS) said the rate of unemployment edged back to 5% between November and January, down from 5.1% in the previous three months.
Economists had expected the rate to rise to 5.2%.
The data also showed the number of workers on UK payrolls increased for the third month in a row, up 68,000 or 0.2% in February, in what experts said was a further sign that the jobs market was stabilising.
But payroll worker numbers have now fallen by 693,000 since February 2020 after a devastating year, with more job losses to come after furlough ends.
More than half of this fall – 368,000 jobs – were lost in the hospitality sector as lockdowns and restrictions hammered the industry, according to the figures.
The ONS added that 123,000 payroll jobs were also lost in the hard-hit retail sector, while more than 60% of the total fall over the past year was for those aged under 25 in a sign of the toll taken by the crisis on young workers.
Chancellor Rishi Sunak said: “Coronavirus has caused one of the largest labour market shocks this country has ever faced, which is why protecting, supporting and creating jobs has been my focus throughout this crisis.
“We have taken decisive action with a £352 billion package of support.”
Overall, unemployment stood at 1.7 million between November and January, up 11,000 over the quarter and 360,000 year-on-year, the ONS said.
Employment was down 147,000 in the quarter at 32.4 million.
The claimant count – another measure that includes people working with low income and hours as well as people who are not working – rose 3% to 2.7 million.
The ONS added that the number of non-UK born workers on payrolls fell by 177,800 – or 4% – year-on-year in the final quarter of 2020.
The figures showed an improving picture for job hunters, with 601,000 vacancies between December and February.
This is 26.8% lower than a year earlier, but the decline has eased steadily from a near-60% drop last summer, though the ONS said the rate of improvement has slowed in recent months.
Official figures earlier this month showed the economy contracted by 2.9% in January as the third lockdown started, but this was less than feared and a far cry from the double-digit fall of last April at the height of the first wave.
The Chancellor also extended furlough to September as part of extra Covid-19 support measures in the Budget.
This saw the Office for Budget Responsibility (OBR) revise down its forecasts for unemployment to peak at 6.5% by the end of the year – down from November’s estimate of 7.5%.
Howard Archer, chief economic adviser to the EY Item Club, predicts the rate will peak at 6% in the fourth quarter.
He said: “The latest labour market data are somewhat mixed but show considerable resilience overall.
“This indicates that the extensions of the furlough scheme are having a significant impact in limiting job losses.”
But Suren Thiru at the British Chambers of Commerce cautioned: “With many firms struggling with the damage done to their cashflow by a year of Covid restrictions, unemployment is likely to remain on an upward trajectory until well beyond a full reopening of the economy.”
The latest jobs figures also showed growth in average pay excluding bonuses rose to 4.2% in the three months to January from 4.1% in the previous quarter, yet with many jobs axed being lower-paid roles, the underlying increase is around 2.5%, the ONS said.