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Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Britain faces a surge in unemployment before Christmas, economists fear, as business struggle under lockdown restrictions and the government prepares new rules for areas where Covid-19 is the biggest threat.
The CEBR thinktank is warning this morning that at least 1.25 million more people are at risk of losing their jobs by Christmas, as it hikes its Christmas unemployment forecast.
With Covid-19 still battering the economy, more companies will be forced to lay staff off – particularly those who were furloughed since the lockdown.
As CEBR warns…
The job market outlook is negative for the coming months…
…the coming winter looks set to be a tough one.
That would push the jobless total towards three million – up from 1.4m this summer. It would drive the unemployment rate over 8% – for the first time in almost a decade.
The CEBR has calculated that 1.2m furloughed workers are at risk being laid off when the scheme expires at the end of the month, and that a further 300,000 are likely to be made redundant.
Worryingly, the CEBR doesn’t believe the government’s latest initiative — a new local furlough scheme for the hospitality industry announced on Friday afternoon — will make a major difference. It might save 250,000 jobs – or one-in-six of those at risk.
They explained:
The newly announced furlough scheme is well targeted to soften the blow for businesses in the hospitality sector which now seem most at risk from another shut down. However, from March/ April we know that there are a range of economic knock-on effects from lockdowns and not all businesses in need will find that they are eligible.
So while the scheme is an important lifeline for pubs and restaurants, our rough-and-ready estimates show that it will save at most 150,000 – 250,000 of the 1.5m jobs we estimated will be lost by Christmas.”
That will worry employees across the UK, especially those who could find themselves on the sharp end of a new three-tier system of Covid-19 restrictions.
The EY Item Club is also warning that unemployment will spike in the coming months — even though it’s less pessimistic about this year’s recession.
After strong growth in July-September, the EY ITEM Club now expects the economy to contract 10.1% in 2020, up from the 11.5% contraction forecast in the Summer.
The strong Q3 performance was driven by consumer spending and the release of pent-up demand as COVID-19 restrictions were relaxed.
However, these effects will wane heading into Q4, while the economy will also face the end of the furlough scheme and likely higher unemployment, tighter COVID-19 restrictions and uncertainties around the future of the UK-EU trading relationship.
Also coming up today.
It’s Nobel Prize for Economics day!
Now, the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel isn’t technically a Nobel Prize – being created decades later by Sweden’s central bank, and awarded by the Royal Swedish Academy of Sciences in Stockholm.
But it’s still the biggest gong in the economics world, having been won by many of the discipline’s leading lights – from Jan Tinbergen and James Tobin to Elinor Ostrom and Angus Deaton.
Last year, Esther Duflo, Abhijit Banerjee and Michael Kremer were recognised for their work on alleviating global poverty.
Plus, the International Monetary Fund and the World Bank’s annual meeting is taking place, virtually, this week – under the shadow of the worst slump in decades due to Covid-19.
Today, ECB President Christine Lagarde and IMF European Department Director Alfred Kammer will talk abut the need for ‘structural transformation’ to improve the economic landscape after the pandemic.
The agenda
- 7am BST: China car sales for September
- 10.45am BST: Sveriges Riksbank Prize in Economic Sciences announced
- 12pm BST: ECB’s Christine Lagarde and IMF’s Alfred Kammer discuss the post-pandemic economic landscape