Britain’s unemployment rate has risen to 5pc, the highest level since the pandemic, in the clearest indication yet that the labour market is losing momentum.
Figures from the Office for National Statistics (ONS) show 1.79 million people were searching for work in the three months to September, the largest number since December 2020, when the country remained under Covid-19 restrictions.
More than a quarter of those out of work have been unemployed for at least a year, marking the first return to that level of long-term joblessness in three years.
Redundancies also picked up sharply. Employers cut 134,000 jobs during the period, the biggest quarterly total since early 2021. At the same time, wage growth lost steam: average regular pay rose 4.6pc, its weakest pace since spring 2022.
ONS director of economic statistics Liz McKeown said:
“Taken together, these figures point to a weakening labour market. The number of people on payroll is falling, with revised tax data now showing falls in most of the last 12 months. Meanwhile, the unemployment rate is up in the last quarter to a post-pandemic high.”
Opposition parties blamed government policy for the deterioration. Shadow work and pensions secretary Helen Whately said the country had experienced “13 consecutive months of rising unemployment,” adding:
“That’s thousands of families without the security of a regular pay packet thanks to the Chancellor’s bad choices hiking up taxes on jobs, piling red tape on businesses, and destroying confidence in the economy.”
She argued that “high-tax, anti-business policies are driving opportunity out of Britain.”
Work and Pensions Secretary Pat McFadden defended the Government’s approach, pointing to reforms designed to boost employment.
“Over 329,000 more people have moved into work this year already, but today’s figures are exactly why we’re stepping up our plan to get Britain working,” he said, highlighting efforts to modernise Jobcentres, expand youth hubs and strengthen partnerships to tackle ill-health.
The softening labour market is likely to intensify debate over the Bank of England’s next move on interest rates. Payroll data showed the number of workers on company books fell by another 32,000 in October, matching the drop recorded the previous month. Vacancies also continued to slide, down by an estimated 99,000 in the three months to October compared with a year earlier.
Yael Selfin, chief economist at KPMG UK, said the latest figures reinforce the case for loosening monetary policy:
“Today’s data strengthens the Bank of England’s case to resume cutting interest rates next month, as moderating wage pressures and a softening labour market are expected to bring wage growth closer to levels consistent with the inflation target by the end of the year.”
She added that private sector wage growth, a key metric for the Bank, is likely to fall further as more people look for work, weakening employees’ bargaining power.
The Bank kept rates on hold at 4pc last week.
Private sector earnings rose 4.2pc between July and September, the slowest pace in nearly four years. Public sector wages, however, grew 6.6pc, the strongest in two years, reflecting pay awards implemented earlier than last year.
McKeown noted:
“Wage growth in the private sector slowed further, but we continue to see stronger public sector pay growth, reflecting some pay rises being awarded earlier than they were last year.”
The labour market update comes amid broader tensions in the global economy, with equity markets in Asia slipping and investors assessing the outlook for US fiscal negotiations and the technology sector. UK markets opened flat across major indices.
The value of the pound dropped after official figures showed unemployment rose to a four-year high of 5pc.
Main Image: For illustration purposes
