UK Unemployment Rate Rises
The UK unemployment rate has risen to levels not seen since the end of 2020, according to official figures released ahead of the Budget. The Office for National Statistics (ONS) reported a figure of 5% for the three months to September – up from 4.8% last month.
Current Trends
This means the unemployment rate remains at its highest level since December 2020 to February 2021. When Labor took office last year it was at 4.1%. The ONS said men would be hardest hit by the shift. There was no better news in wider experimental HMRC data published by the ONS, which showed a 32,000 fall in wage employment in October.
Causes of the Rise
The increase in the minimum wage and employers’ social security contributions, which came into effect in April, weighed on employment and investment sentiment in the private sector. It also coincided with the height of uncertainty over the US trade war. The measures introduced in the first budget have had a significant impact on the labor market.
Labor Market Weakening
Liz McKeown, director of economic statistics at the ONS, said of the data: “Taken together, these figures point to a weakening labor market.” The number of wage earners is falling, with revised tax data now showing declines in most of the last 12 months. Meanwhile, the unemployment rate rose last quarter to its highest level since the pandemic.
Wage Growth
The wage growth rate in the private sector was 4.2%, compared to 6.6% in the public sector. Private sector wage growth has continued to slow, but we continue to see stronger public sector wage growth, reflecting some wage increases being delivered earlier than last year.
Impact on the Budget
The ONS figures have been published as the clock ticks down to the Chancellor’s second Budget, due on November 26. The Chancellor used an event at Downing Street last week to set the stage for a series of painful measures, expected to be only partly offset by some announcements, to keep Labor MPs on guard as she stares at a black hole in the public finances believed to be around £30bn.
Reaction to the Data
Liberal Democrat Treasury spokeswoman Daisy Cooper said of the jobs data: "Certainly the signs are now set for the Chancellor’s jobs tax." The Conservatives accused the Chancellor of presiding over a “high-tax, anti-business” agenda. Secretary of State for Work and Pensions Pat McFadden said: “Over 329,000 more people have already found work this year, but today’s figures are exactly why we are stepping up our plan to get Britain working.”
