UK Unemployment Rate Rises To 4.2 Percent

UK unemployment rate rises to 4.2 percent as at April 2024. This statistic was released by the Office of National Statistics.

The number of unemployed increased more than expected in February, prompting concerns that firms are starting to lay off employees in reaction to high interest rates.

According to the Office for National Statistics, the jobless rate rose to 4.2% in February from 3.9%, much beyond the 4% forecast by City analysts.

Analysts claimed the chilling impacts of increased interest rates were causing more layoffs and discouraged firms from hiring.

Despite rising unemployment, normal wage growth excluding bonuses was greater than projected at 6% in the three months to February, highlighting the Bank of England’s quandary over when to begin lowering interest rates.

Pay increase of 6% fell from 6.1% but was higher than the 5.8% forecast by Reuters economists. Total compensation, including bonuses, remained constant at 5.6%.

According to Yael Selfin, chief economist at KPMG UK, the latest ONS data suggests that the Bank will decrease interest rates this summer.

“The slight easing in regular pay growth will bring some comfort for the Bank of England, which has relied on the pay data as a key gauge of domestic inflationary pressure,” the economist said.

“Furthermore, the rise in the unemployment rate suggests a less tight labor market. The exact timing of the first-rate drop will be a contentious issue for the monetary policy committee in the coming months.”

Workers in the hospitality sector received an average 8.4% wage hike, while those in the city received an 8.1% increase.

Real total pay increased by 1.8% after accounting for consumer price inflation, while real regular pay increased by 2.1%; both were last higher between July and September 2021.

The inactivity rate, which measures the number of persons of working age who are employed or actively seeking for work, also rose in February, as workers continued to exit the labor force due to illness.

Officials at the Bank of England have expressed concern about the rising inactivity rate, which has reduced the workforce and driven firms to pay higher wages, hence raising expenses and inflation.

There are approximately 850,000 more working-age persons unemployed than before the pandemic because they are no longer seeking work or are unable to start. Long term illness also counts towards this.

“Today’s jobs figures are surprisingly poor, with a steep fall in employment and a sharp rise in those out of work, including an unexpected rise in unemployment,” said Tony Wilson, head of the Institute for Employment Studies.

“However, most concerning is the rise in economic inactivity, which is the measure of those not in work but not looking for work, which is even higher now than it was in the depths of the pandemic.”

According to Ben Harrison, head of the Work Foundation at Lancaster University, the UK workforce is “sicker and poorer,” as well as a “international outlier.”

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