LONDON (Reuters) – The number of people on British employers’ payrolls fell by more than 600,000 in April and May as the coronavirus lockdown hit the labour market, and vacancies plunged by the most on record, data showed on Tuesday.

The jobless rate unexpectedly held at 3.9% over the three months to April, but that was largely due to the government’s huge job retention scheme and a rise in the number of people not classed as unemployed as they were unable to seek work in lockdown.

During the same period there was a record slump in Britain’s overall economic output. Economists polled by Reuters had mostly expected a jump in the unemployment rate to 4.7%.

“Unemployment will get worse before it gets better,” Nye Cominetti, an economist at the Resolution Foundation think tank, said, pointing to the scheduled expiry of the government’s furlough scheme at the end of October.

“The government will need a bold package of support measures in place to help them before this second wave of unemployment arrives,” he said.

Many companies, ranging from carmakers to airlines, have announced permanent layoffs of workers.

Figures based on tax data showed the number of people on employers’ payrolls fell by 612,000 in April and May although the pace of decline slowed last month. That left the number of paid employees 2.1% lower than in March, the ONS said.

Vacancies fell by the most since the ONS began measuring them in 2001, down 342,000 to 476,000.

The number of people claiming Universal Credit welfare rose by a larger-than-expected 528,900 in May to 2.8 million, more than double the number in March. The figure includes people who are in work but are entitled to support due to a low income.

Prime Minister Boris Johnson, trying to balance the need to revive the economy with the risk of a second wave of COVID-19 infection, has ordered a review of England’s two-metre social distancing rule which would help companies get back up to speed.

Johnson and finance minister Rishi Sunak are also reportedly considering increasing a tax incentive for small firms to hire workers, and suspending social security payments by employers.

The impact of the government’s furlough scheme – which now covers 9.1 million jobs – was clear in Tuesday’s figures. The number of hours dropped by the most on record and pay rose at its slowest pace in over five years, reflecting how workers on the programme only receive 80% of their normal pay.

GRAPHIC-UK employers cut jobs and slash vacancies due to COVID tmsnrt.rs/30IUDfH