image source, Getty Images
- Author, Mitchell Labiak
- Role, Business reporter
The unemployment rate unexpectedly rose to its highest level in two and a half years, official figures show.
The rate climbed to 4.4% in the three months to April, the most since September 2021.
Despite this increase, wage growth remained strong, with earnings continuing to rise faster than prices.
The unemployment rate rose further to its highest level in nearly a decade, with more than a fifth of people of working age not actively looking for work.
“This month’s figures continue to show signs that the labor market may be cooling, with job vacancies continuing to fall and unemployment rising, although earnings growth remains relatively strong,” the Office for National Statistics (ONS) said.
Regular earnings – excluding bonuses – rose at a year-on-year rate of 6%, the ONS said, unchanged from the previous month.
However, after adjusting for inflation, wages rose at an annualized rate of 2.9%, the most since August 2021.
Economists had expected wages to rise due to an increase in the national living wage in April. For people aged 21 and over, it rose to £11.44 an hour, up 9.8% on last year.
While the ONS has called for caution on the unemployment figures because its survey sample is small, they are supported by more recent employer payrolls data which show that the number of people employed fell by 36,000 between March and April and has continued to fall. May.
The number of job vacancies also decreased, by 9,000 to 904,000.
ONS figures showed that 22.3% of working-age adults in the UK are not actively looking for work, which is more than nine million people.
There have been concerns about a shortage of workers impacting the UK economy, and the adult inactivity rate has remained at a persistently high level in recent years since it first spiked during the pandemic.
The figure is now the highest since 2015, with an increase in long-term illness a key factor. As of 2022, it has become the number one reason people of working age are economically inactive.
The latest data will be studied by the Bank of England to help decide the timing of its first interest rate cut since the start of the pandemic.
The bank meets next week to discuss interest rates, but KPMG chief economist Yael Selfin said the “mixed” data was “unlikely to move the Bank of England’s dial” and predicted it would leave rates unchanged this month.
She said the weaker demand for staff was attributed to “a shortage of roles and firms delaying recruitment decisions”.
Abrdn Deputy Chief Economist Luke Bartholomew said: “UK wage growth remains very strong, but with further evidence that the labor market is cooling, this news is unlikely to significantly change the Bank of England’s thinking.
“We expect the first rate cut in August, but that depends on further progress in reducing core inflationary pressures over the next few months,” he added.
Work and Pensions Secretary Mel Stride told the BBC that the unemployment rate had risen only “slightly” and that it was “still at relatively low levels historically”.
“Our employment record is extremely strong,” he added.
Shadow Work and Pensions Secretary Liz Kendall said: “Today’s figures confirm that the Tories have no cover after 14 years of abject failure.”
Lib Dem Treasury spokeswoman Sarah Olney said: “This Tory carousel of chaos has our economy on a rollercoaster ride and the British people are sick and tired of it.”
SNP spokesman Drew Hendry said: “These latest figures show the Tories have destroyed the economy with years of austerity, Brexit and the cost of living crisis – and they have no plan to fix it.”
A Green Party spokesman said rising unemployment “combined with declining public services […] is a fitting but tragic testament to a government that is out of reach and out of time”.
A spokesman for Plaid Cymru noted that Wales had the highest rate of economic inactivity and the lowest rate of employment, describing it as “a damning indictment of both the Conservatives in Westminster and Labor in Wales”.
The BBC has also asked Reform UK for comment.