Britain's unemployment rate has unexpectedly climbed to 5%, while vacancies have slumped to their lowest level in five years, according to official figures from the Office for National Statistics (ONS). The data reveals a sharp pullback in hiring across the under-pressure retail and hospitality sectors.
Unemployment and Vacancy Trends
The ONS reported that the jobless rate rose to 5% in the three months to March, up from 4.9% in the three months to February. Most economists had anticipated no change. The number of workers on UK payrolls also fell by 100,000 during April to 30.2 million, marking the largest monthly drop since May 2020, though these figures are subject to revision.
Vacancies decreased 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 firms experienced some of the steepest declines in payroll numbers and vacancies, with the ONS noting that businesses in these sectors cited economic and geopolitical uncertainty as reasons to halt hiring.
Earnings and Inflation
Regular earnings growth also slowed further, falling to 3.4% in the first quarter from 3.6% in the three months to February, the lowest since October 2020. This figure only marginally outpaced Consumer Prices Index inflation by 0.3%.
Liz McKeown, ONS director of economic statistics, commented: "Latest figures suggest the labour market remains soft, with vacancies at their lowest level in five years and unemployment higher than a year ago." She added that lower-paying sectors such as hospitality and retail have seen some of the largest falls in vacancies and payroll numbers, both in recent months and over the past year.
Impact on Young Workers
The unemployment rate among 16 to 24-year-olds jumped to 16.2% in the three months to March, the highest level since 2015, as these young workers traditionally find employment in the affected sectors. The ONS revealed that retail vacancies fell by 7,000 quarter-on-quarter in the three months to April, while hospitality saw a decline of 11,000. Payroll workers in these sectors also dropped sharply, with retail down 76,000 year-on-year in April and hospitality down 75,000.
Economic Context and Forecasts
The figures follow recent warnings about rising unemployment due to the inflation shock caused by the Iran war and its impact on consumer spending and the wider economy. The Bank of England last month predicted that even in its most optimistic forecast, unemployment would hit 5.5% in 2027, rising to 5.6% in a more severe impact scenario. Retail and hospitality firms are considered particularly vulnerable, having already faced soaring labour costs in recent years.
Work and Pensions Secretary Pat McFadden stressed that the latest figures also show 416,000 more people in work than a year ago. He said: "While this is encouraging, we know the conflict in the Middle East is casting a shadow on the labour market."
