Unemployment has risen to its highest level in nearly five years, delivering a further reminder to Chancellor Rachel Reeves that businesses are struggling to meet the cost of hiring staff.
The UK jobless rate ticked up to 5.2% in December from 5.1% in the three months to November
It is at it highest since the three months up to January 2021 and compares with a rate of 4.1% when Labour took office in July 2024.
Stephen Kinnock, a UK health minister, said: “We know that we had the best growth of all the G7 European countries last year, and on unemployment, I think we’ve seen something like 440,000 new jobs created in the economy.”
Ms Reeves’ 2024 Budget hiked employer National Insurance contributions and saw a rise in the minimum wage, leading some businesses to slow down hiring and replacing outgoing workers.
The Office for National Statistics (ONS) said the figures reflected “weak hiring activity”, but also that more people who are out of work are now looking for jobs.
However, it has continued to advise caution when interpreting changes in the monthly unemployment rate and job vacancy numbers over concerns about the reliability of the figures.
Luke Bartholomew, Deputy Chief Economist, at Abderdeen said: “With unemployment ticking up and payrolls declining again, this is yet another soft labour market report.
“And crucially, from the perspective of the Bank of England and the outlook for inflation, this weakness is continuing to pull down on wage growth.
“Private sector pay growth in particular has essentially returned to an inflation-target consistent rate, meaning that as and when inflation falls to 2% later this year it is likely to stay there rather than start increasing again.
“Of course, the inflation data tomorrow could throw a wrench in the works, but for now it seems there is a clear case for a further rate cut at the Bank’s next meeting in March, and we continue to expect rates to fall to 3% later this year.”
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