The unemployment rate in the UK has surged to its highest level in more than two years, according to official figures released today. The rate increased to 4.4% in the three months leading up to April, marking the highest since September 2021.
Despite this rise, wage growth remains robust, with earnings continuing to outpace inflation. The inactivity rate also saw an increase, reaching its highest level in nearly a decade. Over a fifth of working-age individuals are currently not actively seeking employment.
“The latest news suggest a cooling labor market, with a decline in vacancies and a rise in unemployment, although earnings growth remains relatively strong,” stated the Office for National Statistics (ONS).
Regular earnings, excluding bonuses, rose at an annual rate of 6%, consistent with the previous month. Adjusted for inflation, pay grew at an annual rate of 2.9%, the highest since August 2021.
Economists had predicted a rise in pay due to the increase in the National Living Wage in April, which now stands at £11.44 per hour for those aged 21 and over, a 9.8% increase from the previous year.
While the ONS cautioned about the unemployment figures due to a small survey sample, these numbers are supported by recent payroll data, showing a decline of 36,000 employees from March to April, with a continued drop in May. Job vacancies also fell by 9,000 to 904,000.
The ONS indicate that 22.3% of working-age adults in the UK, equating to over nine million people, are not actively seeking work. Concerns over worker shortages impacting the UK economy persist, with the inactivity rate remaining high since the pandemic.
The rise in long-term sickness has been a significant factor, becoming the primary reason for economic inactivity among working-age people since 2022. The latest data will be closely examined by the Bank of England as it considers the timing of its first interest rate cut since the pandemic began.
Although the Bank of England will meet next week to discuss interest rates, KPMG’s chief economist, Yael Selfin, suggested the mixed data is unlikely to prompt a change in rates this month. She attributed weaker staff demand to a lack of roles and firms delaying hiring decisions.
Luke Bartholomew, Abrdn’s deputy chief economist, noted that while UK wage growth remains strong, further evidence of a cooling labor market makes a significant shift in the Bank of England’s stance unlikely. He expects the first rate cut in August, contingent on further reductions in underlying inflation pressures.
Work and Pensions Secretary Mel Stride emphasized that the unemployment rate had only increased slightly and remains relatively low historically. “Our record on employment is extremely strong,” he stated.
Labour’s shadow work and pensions secretary Liz Kendall criticized the government’s performance, stating, “Today’s figures confirm that the Tories have no hiding place after 14 years of abject failure.” Liberal Democrat Treasury spokesperson Sarah Olney added, “This Conservative carousel of chaos has our economy on a rollercoaster ride and the British people are sick and tired of it.” A Green Party spokesperson described the situation as a “tragic testament to a government that is out of touch and out of time. Also, highlighting the combined issues of rising unemployment and decaying public services.
