The UK unemployment rate has risen to 5.0 percent, the highest level in four years, according to the Office for National Statistics. The figure, which covers the three months to September, exceeded economists' expectations of 4.9 percent and marks an increase from 4.8 percent in the previous quarter. The number of unemployed people now stands at 1.8 million, a level not seen since January 2021 during the Covid pandemic.
The worsening jobs market has fuelled expectations that the Bank of England will cut interest rates in December. Following the data, the probability of a rate cut rose from about 60 percent to 75 percent, and the pound fell 0.3 percent against the US dollar before recovering. The FTSE 100 hit a record high of 9,899, partly driven by hopes of lower borrowing costs.
Separate figures from HM Revenue and Customs showed that the number of workers on company payrolls fell by 180,000 in the year to October, and by 32,000 compared with September. Job vacancies were broadly flat but down 99,000 year-on-year. Annual growth in average weekly earnings dropped to 4.8 percent, below the forecast of 5.0 percent.
Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, described the data as “pre-budget jitters” as businesses cut recruitment ahead of the chancellor’s tax and spending statement. Chancellor Rachel Reeves is expected to raise taxes in the budget on 26 November to fill a £30 billion shortfall in public finances. Business leaders have warned that a £25 billion rise in employer national insurance contributions and an increase in the national living wage from April have already led to job cuts, particularly in hospitality, leisure and retail.
The government has expressed growing alarm over the jobs market slowdown, notably a rise in youth unemployment. The number of young people not in employment, education or training (Neet) has jumped to almost one million, the highest in a decade. Former Labour health secretary Alan Milburn has been appointed to lead an independent review into the role of mental health and disability in youth unemployment. The Bank of England has warned that unemployment could rise above 5 percent next year, which may cool inflationary pressures by reducing wage bargaining power.
