Britain's unemployment rate has unexpectedly climbed to 5 per cent, while job vacancies have plummeted to their lowest level in five years, as businesses face the economic shockwaves from the Iran war, according to official data.
Unemployment and Payroll Decline
The Office for National Statistics (ONS) reported that the jobless rate rose to 5 per cent in the three months to March, up from 4.9 per cent in the previous quarter. This increase defied economists' expectations of stability. Additionally, the ONS estimated a sharp decline of 100,000 workers on UK payrolls in April, bringing the total to 30.2 million. This marks the largest monthly fall since May 2020, during the peak of the Covid pandemic, though these figures are subject to revision.
Vacancies Hit Five-Year Low
Job vacancies fell by 28,000 quarter-on-quarter to 705,000 in the three months to April, the lowest level since the same period in 2021. Retail and hospitality sectors experienced some of the steepest declines in both payroll numbers and vacancies. The ONS noted that firms in these sectors cited “economic and geopolitical uncertainty” as reasons to halt hiring.
Wage Growth Slows
Regular earnings growth also slowed, falling to 3.4 per cent in the first quarter, down from 3.6 per cent in the three months to February. This is the lowest level since October 2020 and only slightly above Consumer Prices Index inflation, by 0.3 percentage points.
Impact on Young Workers
The unemployment rate among 16 to 24-year-olds jumped to 16.2 per cent in the three months to March, the highest since 2015, as young people traditionally find work in the hard-hit retail and hospitality sectors.
Government Response
Work and Pensions Secretary Pat McFadden noted that while 416,000 more people are in work than a year ago, the conflict in the Middle East is casting a shadow on the labour market. The Bank of England has forecast that unemployment could reach 5.5 per cent by 2027 even in a positive scenario, with a more severe impact pushing it to 5.6 per cent.
