Redundancies hit highest level since pandemic as unemployment climbs higher
The UK unemployment rate jumped above the 5 per cent mark and redundancies surged to their highest level since the pandemic.
The Office for National Statistics (ONS) published damning figures on Tuesday morning that will likely send chills throughout the Labour government ministers ahead of the Christmas break.
It said the number of payrolled employess fell by 22,000 in September while the unemployment rate hit 5.1 per cent for the period between August and October.
An early estimate showed there was a drop of 38,000 payrolled employees in November.
Redundancies drove the collapse in jobs figures in the three months to October, with some 156,000 layoffs being reported by the ONS.
This was the highest level in redundancies since February 2021.
Meanwhile, public sector employment rose over the three months and hit a record high of over 4m in September in the central government. An additional 2m people are working in local government.
The data also pointed to a sustained fall in vacancy numbers, with a drop of around 77,000 in the three months to November compared to the same period last year.
Wage growth cools
Wage growth excluding bonuses cooled to hit 4.6 per cent in the three months to October, compared to 4.7 per cent in the previous month.
Including bonuses, the figure fell from 4.9 per cent to 4.7 per cent.
“The overall picture continues to be of a weakening labour market,” said Liz McKeown, director of economic statistics at the ONS.
“The number of employees on payroll has fallen again, reflecting subdued hiring activity, while firms told us there were fewer jobs in the latest period.
“The fall in payroll numbers and increase in unemployment has been seen particularly among some younger age groups.”
Government officials will likely pour over fresh figures with a sense of trepidation.
In the last two months, the government has rolled out a set of policies, including a youth work guarantee, aimed at boosting long-term employment in the UK and to make workers more mobile.
Keir Starmer has also given strong hints that he will look to unveil sweeping welfare reforms next year after former health secretary Alan Milburn and disability minister Stephen Timms respectively complete reviews of youth inactivity and personal independence payments (Pips) for disabled people.
Recommendations could lay out the groundwork for welfare reforms that could save the government billions of pounds and improve growth prospects.
But reduced payments and extra work incentives may be difficult for some Labour backbenchers to stomach given fears around poverty and losing constituents’ support.
Work and pensions secretary Pat McFadden pointed to a decrease in the inactivity rate by 0.1 percentage point as some cause for optimism.
“There are over 350,000 more people in work this year and the rate of inactivity is at its joint lowest in over five years, but today’s figures underline the scale of the challenge we’ve inherited,” McFadden said.
“That is why we are investing £1.5bn to deliver 50,000 apprenticeships and 350,000 new workplace opportunities for young people – giving them real experience and a foot in the door.”
Andrew Griffith, shadow business secretary, said: “The rise in unemployment to 5.1 per cent shows Labour’s bad choices are coming home to roost.
“Higher national insurance, rises in the minimum wage and more employment red tape have all pushed up the cost of hiring so employers are making do with fewer staff.”
Labour market woes adds to pressure on Bank of England
Recent surveys suggest that the jobs market is nowhere near a turnaround as jobs have been shed at a rate not seen since the pandemic, according to monthly S&P Global figures.
The pressure now falls on the Bank of England to act, with policymakers including Alan Taylor and Dave Ramsden warning that the continued decline in jobs figures could send the UK economy into further decline.
The Bank is expected to cut interest rates to 3.75 per cent, the lowest level in nearly three years.
Fresh inflation data is set to be released tomorrow, the last set of figures to be seen by officials before they vote later in the afternoon ahead of Thursday’s announcement.
An unexpected jump in price growth could push Governor Andrew Bailey, the main swing voter on the Monetary Policy Committee, to back a hold on interest rates against some investors’ wishes.