London, June 12, 2024 – The UK’s unemployment rate has unexpectedly surged to its highest level in two and a half years, official figures reveal.
The rate climbed to 4.4% in the three months leading up to April, marking the highest point since September 2021. This increase comes despite continued robust wage growth, with earnings rising faster than prices.
The Office for National Statistics (ONS) reported that regular earnings, excluding bonuses, grew at an annual pace of 6%, maintaining the same rate as the previous month.
However, once adjusted for inflation, pay increased at an annual pace of 2.9%, the highest since August 2021. Economists had anticipated a rise in pay due to the April increase in the National Living Wage, which saw a 9.8% rise to £11.44 an hour for those aged 21 and over.
Despite the wage growth, the labour market shows signs of cooling. The number of vacancies fell by 9,000 to 904,000, and the ONS highlighted a concerning rise in economic inactivity.
The inactivity rate, now at its highest level in nearly a decade, indicates that more than a fifth of working-age individuals are not actively seeking employment.
Over nine million people, or 22.3% of working-age adults, fall into this category, with long-term sickness being a significant factor.
“This month’s figures continue to show signs that the labour market may be cooling, with the number of vacancies still falling and unemployment rising, though earnings growth remains relatively strong,” an ONS spokesperson commented.
The ONS urged caution regarding the unemployment figures due to the small survey sample, but these findings are corroborated by more recent payroll data showing a decrease of 36,000 employees from March to April, with continued declines into May.
The data has prompted concerns about worker shortages impacting the UK economy. Since the pandemic, the inactivity rate among adults has remained persistently high, driven largely by long-term sickness since 2022.
This trend has exacerbated economic challenges, prompting scrutiny from policymakers and economists alike.
KPMG’s chief economist Yael Selfin described the data as “mixed” and suggested it was “unlikely to shift the dial at the Bank of England,” predicting that interest rates would remain unchanged this month.
Abrdn’s deputy chief economist Luke Bartholomew echoed this sentiment, citing strong wage growth but noting evidence of a cooling labour market. Bartholomew anticipates the first rate cut in August, contingent on further progress in reducing underlying inflation pressures.
Political reactions to the figures have been swift and varied. Work and Pensions Secretary Mel Stride acknowledged the increase but emphasized that the unemployment rate remains “historically, relatively low.”
Opposition parties, however, were more critical. Labour’s shadow work and pensions secretary Liz Kendall stated, “Today’s figures confirm that the Tories have no hiding place after 14 years of abject failure.”
Liberal Democrat Treasury spokesperson Sarah Olney criticized the government’s economic management, while SNP economy spokesperson Drew Hendry attributed the rising unemployment to “years of austerity, Brexit, and a cost-of-living crisis.”
The Green Party and Plaid Cymru also issued statements condemning the government’s handling of the economy and public services.
As the Bank of England prepares for its upcoming meeting, these latest figures will be crucial in determining the timing of any potential changes to interest rates.
The UK’s economic outlook remains uncertain, with policymakers facing the dual challenge of supporting wage growth while addressing rising unemployment and economic inactivity.
This article was created using automation technology and was thoroughly edited and fact-checked by one of our editorial staff members
