The UK unemployment rate has increased to 5%, indicating a decline in the jobs market. This rise is significant as it marks the highest rate since early 2021.

At a glance

Unemployment Rate Increase

The UK has reported a rise in the unemployment rate to 5% for the three months ending in September. This figure is notably higher than the 4.9% that analysts had anticipated prior to the upcoming Budget on November 26. The Office for National Statistics (ONS) indicates that this is the highest unemployment rate since the period from December 2020 to February 2021. Liz McKeown, director of economic statistics at the ONS, stated that these figures suggest a weakening labor market. Despite the increase in unemployment, the number of job vacancies has remained relatively stable. However, the ONS has cautioned that the unemployment rate should be interpreted carefully, as they are taking measures to improve data quality.

Wage Growth Trends

In addition to rising unemployment, average wage growth has seen a slight decline. The growth rate fell to 4.6% in the third quarter, down from 4.7% in August. The data reveals a disparity in wage growth between sectors, with public sector wages increasing by 6.6% compared to a 4.2% rise in the private sector. Yael Selfin, chief economist at KPMG UK, noted that public sector pay growth may be nearing its peak due to budget constraints. She also indicated that private sector wage growth is expected to decline further as more individuals enter the labor market, diminishing workers' bargaining power.

Government Response to Job Market

In response to the latest unemployment statistics, Work and Pensions Secretary Pat McFadden highlighted that over 329,000 individuals have found work this year. However, he emphasized that the current figures underscore the need for a robust plan to enhance employment opportunities in the UK. Richard Carter, head of fixed interest research at Quilter Cheviot, expressed concerns that many businesses may postpone hiring decisions until after the Budget. He noted that rising national insurance costs earlier in the year have made companies hesitant to commit to new hires.

Concerns from Small Businesses

Tina McKenzie, policy chair of the Federation of Small Businesses, criticized the government's approach to job creation and business support. She argued that small businesses face barriers to hiring due to increasing regulations and taxes. McKenzie called for decisive action from policymakers to support job growth and alleviate the challenges faced by small enterprises.

Job Vacancies Remain Stable

Despite the rise in unemployment, the overall number of job vacancies has remained steady. The ONS reported approximately 723,000 job vacancies between August and October. This stability in vacancies suggests that while the labor market is facing challenges, there are still opportunities available for job seekers.