The latest data from the Office for National Statistics (ONS) revealed that the UK’s unemployment rate has reached 4.3%, marking a significant increase from the previous rate of 4.2%. This rise in unemployment is attributed to a decline in job vacancies, which fell by 26,000 between February and April, totaling 898,000. The situation indicates a tightening job market and heightened competition among job seekers.
Even though the number of job vacancies remains above pre-pandemic levels, the mounting unemployment rate has led to a rise in the number of unemployed individuals per vacancy. Liz McKeown from the ONS noted that there are signs of the job market cooling down, with the unemployment rate nearing levels seen prior to the Covid-19 pandemic. Furthermore, despite the challenging job market conditions, wage growth has persevered at a steady 6%, surpassing the 3.2% inflation rate for the year to March.
Chancellor Jeremy Hunt acknowledged the positive impact of rising wages in alleviating the cost of living pressures on families, expressing optimism about overcoming labour supply challenges through upcoming reforms in childcare, pensions, and welfare. However, Labour’s Acting Shadow Work and Pensions Secretary, Alison McGovern, criticized the government for worsening conditions in the job market, pointing out the impact of long-term sickness and NHS waiting lists on the workforce.
The data also highlighted a slight decrease in economic inactivity to 22.1% in the first quarter, with an increase in temporary sickness, long-term sickness, or retirement noted as contributing factors. The Bank of England will closely monitor wage figures to guide its decision on interest rates, with the next rate-setting meeting scheduled for June. Despite the robust overall wage growth, there is speculation about the Bank potentially delaying interest rate reductions, according to UK Economist Ashley Webb. Governor Andrew Bailey expressed cautious optimism about the economic direction, emphasizing that a reduction in borrowing costs is not guaranteed, given the current interest rate of 5.25% maintained since last August, the highest in 16 years.