FTSE 100 near 16-month high after new UK jobs data

After lagging rival stock markets during the recovery, there’s interest in UK shares following this encouraging employment report.

The unemployment rate has fallen for the fourth month in a row as the easing of lockdown restrictions since March gave a boost to the jobs market.

Office for National Statistics (ONS) data shows the unemployment rate for February to April was 4.7%.

The figure is 0.8 percentage points up from the pre-pandemic level, but 0.3 percentage points lower than the previous quarter, which the ONS says suggest the jobs market is “showing signs of recovery.”

The FTSE 100 index remains volatile, but it traded as high as 7,183 on Tuesday, a figure not seen since late February 2020 during the early days of the Covid crash.  

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For the three months ending April 2021, the highest unemployment rate estimate in the UK was in London at 6.5%, up 1.7 percentage points annually. Northern Ireland had the lowest jobless rate at 3.1%.

The number of payrolled employees increased for the sixth consecutive month, up by 197,000 in May 2021 to 28.5 million.

It is, however, 553,000 below levels seen before the coronavirus pandemic.

The ONS says: “Following a period of employment growth and low unemployment since the start of the pandemic, employment had generally been decreasing and unemployment increasing. 

“However, the latest estimates continue to show signs of recovery.”

The figures coincide with the first stage of lockdown restrictions easing earlier this year when schools were reopened in March and outdoor meetings were allowed.

Restaurants and pubs reopened from 12 April for outdoor seating, as well as “non-essential” shops, so some of the increased recruitment could have been in preparation for that.

The ONS says total hours worked have increased since lockdown restrictions have begun to ease during the quarter.

The number of job vacancies in March to May 2021 was 758,000, only 27,000 below the level before the coronavirus pandemic in January to March 2020, and the highest level since then, the ONS says.

Most industries have recovered to show vacancies above pre-pandemic levels, the figures show.

Since February 2020, the largest falls in payrolled employment have been in the accommodation and food services sector, people aged under 25 years, and people living in London.

In contrast, the strongest quarterly increase in vacancies was in accommodation and food services between March and May 2021.

Many of these jobs may have been advertised ahead of the anticipated full lifting of lockdown restrictions from 21 June, which has now been delayed by four weeks.

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Richard Hunter, head of markets at interactive investor, says the delay has “tapped the brakes” on the accelerating UK economic recovery.

He adds: “A marginal improvement in the unemployment rate is welcome, but the figures are akin to driving with the rear-view mirror.

“In particular, the rate within the hospitality sector and among the young remains stubbornly high, and the extension to the current lockdown restrictions is something which adds to this uncertainty. 

“Overall, the employment rate has yet to recover to pre-pandemic levels.

“The market had been expecting the move, with the likes of hospitality and travel stocks in particular seeing a further lurch downwards, with the additional complication of certain of the government assistance schemes also nearing an end. 

“There may yet be something of a compromise along the way to safeguard jobs further, with the government having played the cautious health card ahead of completely letting the economy loose.

“However prudent the government’s decision proves to be, it nonetheless taps the brakes on what had been an accelerating UK economic recovery.”