Unemployment "remains low" despite grim headlines, says IEA expert

"Looking past the grim headlines, the latest labour market data are actually reassuring. The detail suggests that unemployment levelled out in November itself, while the economy may have added jobs in December. This provides further evidence that the hit from the second national lockdown was smaller than expected.

"Unemployment also remains low in the UK compared to the rest of Europe and is still only half where some feared it might be. This is a tribute both to the success of government policies to protect jobs and the relative flexibility of the UK economy.

"The burden of job losses is still mainly falling on young people. However, this is largely because they are more likely to work in the sectors which have suffered the most from Covid restrictions, notably hospitality. As and when the lockdown is lifted, they will hopefully be reemployed relatively quickly too, without the need for the government to do more.

"In the meantime, there is a good case for extending the furlough scheme a little longer and providing additional support to sectors like hospitality, at least while the Covid restrictions are in place. But beyond that, government subsidies could simply distort incentives and hold back the recovery."