Unemployment in Britain has risen to the highest level in close to five years, after Office for National Statistics (ONS) data showed a higher-than-expected rise to five per cent in the three months to September.
That’s an increase from 4.8 per cent up to August and the highest level since early 2021 - while wage growth has also slowed further, signalling a weakened labour market.
Most analysts had forecast a jobless rate of 4.9 per cent, according to Pantheon Macroeconomics.
The ONS said average regular wage growth also pulled back again, to 4.6 per cent in the three months to September, down from 4.7 per cent in the previous three months, and was 0.8 per cent higher after taking Consumer Prices Index (CPI) inflation into account.
Wage growth is now the lowest seen since April 2022.
In further evidence of a tough jobs market, the ONS said the number of workers on UK payrolls fell by 32,000 during October to 30.3m, following a 32,000 drop the previous month.
ONS director of economic statistics Liz McKeown said: “Taken together these figures point to a weakening labour market.
“The number of people on payroll is falling, with revised tax data now showing falls in most of the last 12 months. Meanwhile the unemployment rate is up in the latest quarter to a post-pandemic high.”
Secretary of State for Work and Pensions, Pat McFadden said: “Over 329,000 more people have moved into work this year already, but today’s figures are exactly why we’re stepping up our plan to Get Britain Working.
“We’ve introduced the most ambitious employment reforms in a generation to modernise jobcentres, expand youth hubs and tackle ill-health through stronger partnerships with employers.
“And this week we’re going further by launching an independent investigation that will bolster our drive to ensure all young people are earning or learning.”
Experts are now raising the prospect of an interest rates cut in December, after the Bank of England (BoE) opted to hold tight at 4 per cent base rate last week - albeit by a split vote.
Thomas Pugh, chief economist at audit firm RSM UK said: “A rise in the unemployment rate, the highest level since the pandemic, and a further slowing in private sector pay growth throws the door wide open to a December rate cut – as long as the budget is as deflationary as the Chancellor hinted at last week.”
Deutsche Bank’s chief UK economist, Sanjay Raja, noted that the voting members of the BoE - the Monetary Policy Committee - had asked for more data before committing to a cut, which this will form a part of.
“Big picture, bar any revisions, today’s data speaks to two things: one, there’s more slack building in the labour market – and perhaps more so than assumed by the MPC in its November projections; and two, pay momentum continues to slow. Both should be encouraging for the MPC,” he said.
“Indeed, Governor Bailey talked up the need for a larger accumulation of evidence for the MPC to cut Bank Rate later this year. And today’s data should give the majority of the MPC some added confidence that weakness in the labour market is translating into weaker pay momentum, which should ultimately feed through into inflation in the months and quarters to come.”
A statement from the Trades Union Congress (TUC) after the figures were announced noted there were “no easy fixes” for the job market but urged Rachel Reeves to put workers’ rights at the heart of her announcement later this month.
“Living standards and decent jobs must be at the heart of the Budget,” said TUC general secretary Paul Nowak.
“Households up and down the country are still feeling the pinch, with real pay sluggish. After years of falling living standards there is still much ground to make up.
“The government is on the right track with serious public investment, stronger workers’ rights and improving the support people need to get into work.
“The Chancellor must build on this at the Budget by boosting living standards and bringing down household bills, sustaining investment in our infrastructure and continuing to repair our public services.”
Additional reporting by PA
This article was written by Karl Matchett from The Independent and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.