UK Unemployment Falls to 4.9% in Three-Month Low, Offering Boost for Keir Starmer
New data from the Office for National Statistics reveals a mixed picture for the UK's jobs market, with unemployment declining but wage growth slowing. The figures, covering the period up to February, precede the full economic impact of the Middle East conflict, which experts warn could exacerbate challenges in the coming months.
Key Statistics on Employment and Wages
The unemployment rate dropped to 4.9% in the three months to February, down from 5.2% in the previous quarter, marking the lowest level in three months. Average wages grew by 3.6% over the same period, a decrease from 3.8% in January and the slowest rate since November 2020. Pay including bonuses rose by 3.8%, with both figures exceeding expectations.
Wage growth varied significantly between sectors, with the public sector averaging 5.2% and the private sector at 3.2%. Meanwhile, job vacancies fell by 29,000 (3.9%) to 711,000 in the latest quarter, reaching the lowest level since February to April 2021, making it harder for those who lose jobs to find new positions.
Expert Warnings on Economic Risks
Liz McKeown, ONS Director of Economic Statistics, noted that payroll numbers remained flat, reflecting weak hiring, while unemployment fell and inactivity increased. She highlighted that regular wage growth has slowed to its lowest rate in over five years.
Yael Selfin, chief economist at KPMG UK, commented that wage growth was easing before the Middle East conflict, with lower risks of a wage-price spiral due to a weaker labour market. However, she cautioned that unemployment may rise as firms scale back hiring in response to rising costs and weaker demand.
Luke Bartholomew, deputy chief economist at Aberdeen, pointed out that the unemployment drop might be dismissed by markets as it predates the Iran conflict and reflects rising inactivity rather than stronger hiring. He warned that households could face negative real wage growth as inflation increases, further weighing on economic growth.
Broader Economic Context and Future Outlook
The data comes ahead of crucial inflation figures due this Wednesday, which will show any early effects of the Middle East conflict in March. Experts predict that the conflict could drive up inflation and potentially increase unemployment as businesses grapple with higher costs.
Overall, while the decline in unemployment offers a temporary boost, the slowing wage growth and falling vacancies signal underlying weaknesses in the UK economy, with significant uncertainties looming from global geopolitical tensions.
