Covid will push benefit claims to 30-year high
THE number of people claiming benefits will hit 3 million for the first time in over 30 years due to the coronavirus, official data is expected to show this Thursday.
Economists believe the Office for National Statistics will say the number of people claiming benefits rose by 250,000 in June, taking the total to 3.05 million.
The last time the figure was that high was in October 1986. The ONS is also likely to say the unemployment rate in May rose from 3.9 to 4.1 per cent.
The coronavirus has crippled the economy, resulting in millions being put on furlough and millions more losing their jobs. This Tuesday, the ONS is expected to say GDP grew by 5 per cent in May, rebounding from the record 20.4 per cent fall it experienced in April.
However IHS Markit chief business economist Chris Williamson said: “We expect a technical rebound in GDP from
April’s lows but that will not tell us much. It is all about how things pan out over the next few months. The big uncertainty is what happens after the furlough scheme unwinds.
“We are in a false reality, the question is what the numbers will look like when the scheme is taken away. We expect a dead cat bounce in the numbers.”
Janus Henderson economic adviser Simon Ward agreed and warned that the unwinding of the Government’s furlough and self-employed financial assistance schemes, which begin next month, will trigger a spike in the number of people out of work and claiming benefits.
He said: “We’ll see a rise in unemployment this week but the furlough scheme is having a suppressing effect at the moment.we’ll see a much bigger rise later in the year as the scheme is unwound.”
Samuel Tombs, Pantheon Macroeconomics chief UK economist, said: “We expect May’s GDP report to provide an early blow to hopes that the economy will embark on a V-shaped recovery this year. We look for a 5 per cent rise, which would reverse about a fifth of the previous two months’ 25.1 per cent decline.
“The recovery will struggle for traction beyond August, when rules restricting the operation of businesses will have been lifted to the maximum extent compatible with controlling the virus, while some furloughed workers will lose their jobs as state support is withdrawn.”
The ONS is also expected to say average earnings have fallen for the first time since June 2014 this week, down 0.5 per cent over the three months to the end of May.