UK unemployment rises to highest in nearly four years
The unemployment rate in the UK has risen to its highest level in almost four years, according to official figures, as the jobs market continues to slow.
The Office for National Statistics (ONS) said the rate was 4.5% in the first three months of this year, up 0.2% on the previous quarter and the highest reading since summer 2021.
Unemployment is measured using the ONS's widely criticised labour force survey, which has suffered from collapsing response rates – although the ONS published an update alongside Tuesday's data citing 'clear improvement'.
Related: UK wage growth slows and vacancies drop, as labour market cools – business live
The higher joblessness rate emerged in a slew of UK labour market data released on Tuesday that pointed to a slowdown, amid increases to employer national insurance contributions (NICs) and the national living wage.
The number of vacancies in the economy was down 5.3% in the three months to the end of April, the ONS said. There were 761,000 job vacancies in that period, a 131,000 drop on a year ago, with the construction sector experiencing the biggest decline.
Interactive
Pay growth also weakened, the ONS said, with regular earnings up 5.6% in the three months to March, down from 5.9% in the previous three-month period – although that remains high by historic standards.
Modestly weaker wage growth is likely to reassure the Bank of England's monetary policy committee, which cut interest rates by a quarter point last week to 4.25% but has expressed concern about the continued strength of pay.
Thomas Pugh, an economist at the consultancy RSM UK, said: 'Overall, the labour market is clearly cooling, which should feed into slowing wage growth through this year. But it isn't collapsing. The hawks on the MPC will still be too concerned about strong wage growth to consider going for another rate cut in June.'
The Bank of England's chief economist, Huw Pill, underlined his concerns about wage growth on Tuesday, suggesting it might mean rates have to stay higher for longer.
Speaking at a conference at the London School of Economics, he said he was concerned about the upside risks to inflation, which might get stuck above the Bank's 2% target and could 'mean that the response of monetary policy, in order to ensure that we get back to our target within a reasonable cycle, needs to be somewhat more aggressive or more persistent in itself'.
In another sign of a slowing labour market, Tuesday data showed a decline in the number of payrolled jobs, by 47,000, or 0.2%, between February and March – although the ONS said the overall employment rate, measured using the labour force survey, was 'largely unchanged' at 75%.
Stephen Evans, the chief executive of the Learning and Work Institute, said: 'The labour market continues to slow, with the largest employment falls seen in retail and hospitality.' He added that these were also the sectors where pay growth had been fastest, as the minimum wage rise comes in. 'Time will tell whether this is an indicator of a broader slowdown or a temporary effect,' he said.
The ONS said the economic inactivity rate, which has been a consistent concern of policymakers, was slightly lower, at 21.4% of the working age population – although it remains above the levels seen before the Covid pandemic.
The Bank of England has been monitoring closely the impact on jobs and salaries of Rachel Reeves's £25bn increase in employer NICs. The rise, which took effect last month, came alongside a 6.7% increase in the national living wage, prompting some business lobby groups to warn about rising payroll costs.
Michael Stull, the managing director of the recruitment company ManpowerGroup UK, said: 'The latest labour market data confirms the sentiment of most British employers, whose confidence remains stunned against a backdrop of significant national change and global uncertainty.'
The ONS is facing an independent inquiry into longstanding problems with the quality of its data, including the labour force survey. The national statistician, Ian Diamond, stepped down last week, citing health concerns.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
an hour ago
- Yahoo
UK economy contracts sharply in April: Will the BoE respond?
Britain's economic recovery suffered a setback in April, with gross domestic product (GDP) shrinking by 0.3% on a monthly basis, marking the steepest contraction since October 2023, according to data released by the Office for National Statistics (ONS) on Thursday. The contraction, which exceeded market expectations of a 0.1% fall, has renewed concerns over the UK economy's resilience and intensified pressure on both Downing Street and the Bank of England (BoE)'s policy stance. The April downturn followed a modest 0.2% expansion in March and comes amid a broader backdrop of weakening labour market data and fading consumer momentum. The services sector, which accounts for around 80% of UK economic output, was the primary drag in April, declining by 0.4%. Within services, the professional, scientific and technical activities subsector posted a significant fall of 2.4%. This contraction was driven mainly by a 10.2% plunge in legal activities, attributed in part to the impact of changes to Stamp Duty Land Tax thresholds in England and Northern Ireland. The tax change prompted homebuyers to bring forward purchases to March, resulting in a sharp drop in related services, such as conveyancing and estate agency work, in April. Advertising and market research also contributed negatively to GDP, with output down 3.4%, while growth in scientific research and development (up 6.7%) provided a partial offset. The wholesale and retail trade and repair of motor vehicles and motorcycles subsector also weighed on GDP, declining by 1.2% in April after a 0.9% expansion in March. Related Bank of England cuts main interest rate as US tariffs threaten growth UK unemployment rises to a four-year high as firms cut back on hires Production output fell by 0.6% in April, with manufacturing production sliding 0.9% — adding to a 0.8% fall in the previous month. Overall industrial production contracted by 0.6%, coming in weaker than the 0.5% decline expected by analysts. Despite a rebound in construction output, which rose 0.9% month-on-month, it was not enough to counterbalance the broader economic dip. The downturn in GDP comes on the heels of deteriorating labour market data released earlier this week. The number of payrolled employees fell by 109,000 in May, the seventh consecutive monthly decline and the sharpest drop since May 2020. The total stood at 30.2 million, a 0.4% monthly fall. The unemployment rate ticked up to 4.6% in the three months to April, in line with expectations, while wage growth softened. Regular pay excluding bonuses increased by 5.2% year-on-year — the slowest pace in seven months and below the 5.4% forecast. Despite the mounting economic headwinds, the BoE is widely expected to leave interest rates unchanged at 4.25% at its upcoming meeting next week. However, traders have increased their bets on a rate cut in August, anticipating a 0.25 percentage point reduction as the economy shows further signs of cooling. Overall, money markets are currently pricing two interest rate cuts of cumulative 50 basis points by the BoE this year. Sterling came under pressure following the GDP release, with the euro rising to 0.85 pounds — the highest level in over a month during morning trading. UK government bond yields extended their weekly declines. The yield on the two-year gilt fell to 3.90%, the lowest since early May, while the ten-year yield slipped to 4.53%. Equity markets, however, remained broadly resilient. The FTSE 100 held steady around 8,860 points, just shy of Wednesday's all-time high of 8,885. Among the notable movers, Halma plc surged over 8% on the back of strong corporate results. BP also gained 1.8%, buoyed by higher oil prices following the announcement of a trade agreement between the United States and China. On the downside, Intermediate Capital Group and EasyJet dropped 4.1% and 2.6%, respectively. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
CNBC
an hour ago
- CNBC
UK exports to the U.S. plunge by most on record as tariffs bite
U.K. goods exported to the U.S. dropped by £2 billion ($2.71 billion) in April, figures published by the Office for National Statistics on Thursday showed, marking the biggest monthly decrease since records began in 1997. The value of Britain's exports stateside was the lowest since February 2022 at £4.1 billion, with the ONS saying the shift was "likely linked to the implementation of tariffs on goods imported to the United States." Cars, chemicals and metals exports all saw declines, the ONS said. U.S. imports to the U.K. dipped by £400 million for the month to £4.7 billion, taking Washington back to a trade surplus in goods with the country for the first time since May 2024. The U.K. and U.S. announced the outline of a trade deal at the start of May, but the agreement still imposed 10% blanket tariffs on British goods sent stateside and has not yet been fully implemented. U.S. President Donald's Trump's universal 25% duties on steel and aluminum are set to be slashed to zero for the U.K., while up to 100,000 British cars a year will be hit with a rate of 10% rather than 25%, but higher tariffs remain in force while final details of the deal are confirmed. Trump has looked relatively favorably upon the U.K. during his second presidency while he has slammed other key trading partners such as the European Union. That's in part because of his friendly relations with British Prime Minister Keir Starmer, but primarily because the U.K.-U.S. trade relationship in goods has historically been relatively balanced. Overall, the U.K.'s trade deficit in goods rose by £4.4 billion to £60 billion in the three months to April, while its trade surplus in services dipped by £500 million to £48.5 billion. That took the U.K.'s overall trade deficit to £11.5 billion from £6.6 billion. The ONS noted in its release that monthly trade data could be "erratic" and that its next data set would account for the subsequently-agreed trade deal. Figures also published by the ONS on Thursday showed the U.K. economy contracted by 0.3% in April, below the 0.1% expected by economists polled by Reuters. The U.K.'s dominant services sector was a weak point, shrinking 0.4%, while construction output increased by 0.9%. It follows signs of a weakening U.K. labor market out earlier in the week, with job vacancies down 7.9%, and the employment rate rising to 4.6% from 4.5%. The rate of wage growth eased to 5.3% from 5.6%, with markets subsequently fully pricing in another half-percentage-point interest rate from the Bank of England before the end of the year. Business sentiment remains on edge, due to tariffs and macroeconomic uncertainty, and because of government policies including a minimum wage hike, new worker protections and higher tax rates for employees. Sanjay Raja, chief U.K. economist at Deutsche Bank, said the U.K. economy was "always on a collision course for a course correction after a super strong start to the year." Growth hit 0.7% in the first quarter, accelerating from 0.1% growth in the final quarter of 2024. "While headwinds in April will likely soften in the coming months, they won't dissipate fully. Despite the U.K.'s trade deal with the US, trade uncertainty is here to stay. The labor market continues to loosen too, which will weigh on household spending. And monetary policy remains restrictive, which will also drag on output," Raja said in a note.
Yahoo
an hour ago
- Yahoo
Exports to US slump at record pace in ‘payback' after rush ahead of tariff hikes
British exports slumped by nearly 9% in April after a record drop in goods exported to the US following President Donald Trump's move to hike tariffs, official figures have shown. The Office for National Statistics (ONS) said the value of goods exported to America tumbled by £2 billion in April – the fastest pace since records began in 1997. The drop was led by machinery and transport, including cars, according to separate trade figures from the ONS on Thursday. The value of goods exports to the US are now at their lowest level since February 2022, it added. In total, exports of UK goods in April fell 8.8%, or by £2.7 billion, to £13.7 billion. It follows four months in a row of rising US exports as American importers stocked up ahead of Mr Trump's tariff rises, which came into effect at the start of April. Imports of goods from the US, including precious metals, also fell in April, down by £400 million. ONS director of economic statistics Liz McKeown said: 'After increasing for each of the four preceding months, April saw the largest monthly fall on record in goods exports to the US with decreases seen across most types of goods, following the recent introduction of tariffs.' Exports to the US of machinery and transport equipment, and material manufactures, both tumbled by £800 million in the month, with car exports heavily down. But the ONS said there was also a significant drop in car exports to the European Union in April, with a £900 million decline for machinery and transport. Overall, total goods exports to the EU fared even worse in April, down by £2.1 billion or 12.6%. Mr Trump unleashed so-called reciprocal tariffs on America's largest trading partners at the start of April, including the UK. Britain has since struck a deal that will see UK exports avoid the worst of the trade duties, with a baseline tariff of 10% and exemptions for some key goods, such as steel and aluminium and removing tariffs on UK aluminium and steel exports. But these tariff reductions have not yet come into effect, with aims to finalise the deal by July 9. Experts said last month saw 'payback' for a rush to beat the US tariff hikes earlier in the year. Sandra Horsfield, an economist at Investec, said: 'Distortions around known deadlines were always going to take place and always going to be followed by payback – no matter where, in the end, tariffs landed. 'The bigger question will be how output fares in the coming months, once these temporary effects fade. 'The UK may have secured an agreement to shelter the first 100,000 of cars (roughly the existing level of its car exports to the US) at lower tariffs than other countries face, but this is yet to be signed off by President Trump. 'What will remain is uncertainty over tariffs more widely and importantly the indirect impact this will have on the UK economy,' she added. The ONS figures showed the total goods and services trade deficit widened by £4.9 billion to £11.5 billion in the three months to April, as the rise in imports outweighed the rise in exports. The trade in goods deficit widened by £4.4 billion to £60 billion in the three months to April, while the trade in services surplus is estimated to have narrowed by £500 million to £48.5 billion.
