Unemployment rises as concerns grow for UK jobs market
The unemployment rate rose slightly to 4.8 per cent in September, while the inactivity rate was 21 per cent, “largely unchanged” on the previous quarter but below levels seen a year ago.
The estimated number of vacancies in the UK also fell by 9,000, marking the 39th consecutive period of job posting declines.
The ONS also said on Tuesday wage growth excluding bonuses in the three months to August fell to 4.7 per cent.
Including bonuses, wage growth reached five per cent, which was 0.3 percentage points higher than economists polled by Bloomberg predicted.
The Office for National Statistics said there were 10,000 more payrolled employees in August, an upward revision from an estimate showing a drop of 8,000, a small boost to jobs numbers.
An initial estimate by the Office for National Statistics (ONS) suggested some 10,000 jobs were lost in September, suggesting the concerning trend across the jobs market is set to persist.
“After a long period of weak hiring activity, there are signs that the falls we have seen in both payroll numbers and vacancies are now levelling off,” said Liz McKeown, director of economic statistics at the ONS.
“We see different patterns across the age ranges with record numbers of over 65s in work, which the increase in unemployment was driven mostly by younger people.”
Unemployment data will put pressure on Rachel Reeves
The latest unemployment data will add pressure on Chancellor Rachel Reeves ahead of the Budget given the jobs market has suffered from a year of turbulence since last year’s £20bn hike to employers’ national insurance contributions (NICs).
The retail and hospitality sectors have widely blamed the government for adding costs on businesses, with the incoming Employment Rights Bill threatening to have a “chilling” effect on employment in the UK.
Work and pensions secretary Pat McFadden said: “The numbers of people in work and looking for work are at a record high.”
“However, there are still too many people locked out of employment or training and missing out on the security a good job provides.
Shadow business secretary Andrew Griffith said higher unemployment was “a disaster for the economy and a tragedy for affected families”.
“The growing crisis of young people not being able to find work is a prime example of Labour taking our country in the wrong direction.
“It beggars belief that the government are making things worse with their ‘back to the seventies’ employment legislation, which every single business group opposes.”
Richard Carter, head of fixed interest research at Quilter Cheviot said the new data showed “some significant cracks are forming” in the jobs market.
“With the Budget looming, this is likely to continue,” Carter said.
“Higher national insurance costs have placed a significant burden on businesses already this year, so they will likely hold off on any major hiring plans until they know with certainty whether any further changes lie ahead.”
The unemployment figures are likely to leave Bank of England officials on edge given fears that “second round effects”, where high wage growth and inflation levels bump each other up, could make price growth harder to curb.
External member Catherine Mann said last week that the Bank should keep interest rates at a “restrictive” level in order to squeeze out inflation fears among the British public.
The comments suggest Mann is lobbying her colleagues to keep interest rates at four per cent at the November meeting, which remains on a knife-edge.
Jobs market figures leave Bank of England on edge
Economists believe Governor Andrew Bailey will be the deciding vote, splitting hawks from doves, with the meeting in August having to go to a second vote after Alan Taylor initially voted for a 50 basis point cut.
Taylor argued that a severe weakening in the jobs market posed a threat to the UK economy and would weigh down on price growth.
Other policymakers have said high wage growth levels looked set to push up on wage growth and inflation expectations, which have remained elevated.
The ONS will publish inflation data for September next week. Forecasters believe price growth will rise by as high as four per cent, double the Bank’s two per cent target.
“The modest further falls in both payroll employment and job vacancies in September suggest that the labour market is loosening, albeit only slowly, but wage growth is still easing only fairly gradually,” said Ashley Webb, UK economist at Capital Economics.
“This suggests the Bank of England will remain more concerned over the upside risks to inflation rather than the downside risks to activity.”