Britain’s unemployment rate has surged to its highest level in nearly five years while wage growth has stalled, signaling a cooling labor market that could prompt an interest rate cut.
The UK’s labor market is showing significant signs of weakening, with young people disproportionately affected by the downturn. The Office for National Statistics (ONS) reports that the unemployment rate climbed to 5.1% in the three months ending in October, up from 5% previously. This figure represents the highest jobless rate since early 2016, excluding the pandemic era.
The data highlights that the increase in unemployment is particularly sharp among young adults. The number of unemployed individuals aged 18 to 24 saw a surge of 85,000, the sharpest increase since November 2022.
Furthermore, the number of employees on company payrolls dropped by 38,000 in November, marking the largest decline recorded in the past five years.
Wage growth also dipped to 4.6%, down from 4.7%. Experts suggest this easing of pay pressures supports the argument for the Bank of England to cut interest rates on Thursday, as it reduces fears of inflation.
ONS director of economic statistics, Liz McKeown, stated, “The overall picture continues to be of a weakening labour market… The fall in payroll numbers and increase in unemployment have been seen particularly among some younger age groups.”
Martin Beck, chief economist at WPI Strategy, cautioned that the market faces further stress from upcoming policy changes, including a hike in the National Living Wage.
“The figures will provide another reason for the Bank of England’s Monetary Policy Committee to back an interest rate cut this week,” Beck added.