Labour’s jobs crunch is continuing with figures showing unemployment hitting a four-year high.
The jobless rate unexpectedly ticked up from 4.7 per cent to 4.8 per cent in the three months to August, the worst since the maelstrom of Covid in early 2021.
Meanwhile, vacancies and numbers on payrolls dropped – while the benefits claimant count increased in the month to September.
Worryingly, employment decreased among younger people, while more over-65s – 1.7million – are still working in a sign of the mounting stress on Brits’ finances.
The grim picture from the Office for National Statistics comes as businesses warn Rachel Reeves not to target them again as she desperately tries to fill an estimated £30billion black hole at the Budget.
Although the ONS said there were some signs of the labour market ‘levelling off’, experts warned it remains ‘more fragile than at any time in recent years’.
Regular wage growth fell back to 4.7 per cent in the three months to August, down from 4.8 per cent in the previous three months.
Accounting for CPI inflation, pay increased by 0.9 per cent in the three months to August – the lowest level for two years.
Private sector pay growth also slowed to its lowest rate in nearly four years, at 4.4 per cent, while public sector pay growth increased to 6 per cent. The ONS said that ‘reflects some public sector pay rises being awarded earlier than they were last year’.
Workers on payrolls were up 10,000 between July and August, but early estimates signalled a 10,000 drop during September to 30.3million – 100,000 lower than the same month in 2024.
Vacancies fell by 9,000 to 717,000 in the quarter to September – the 39th consecutive period where they have been down.
The Claimant Count was up over month to September at 1.692million, although it decreased on the year.
ONS director of economic statistics Liz McKeown said: ‘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.
‘We see different patterns across the age ranges with record numbers of over-65s in work, while the increase in unemployment was driven mostly by younger people.’
In a piece of good news for pensioners, total wage growth including bonuses was revised up for the quarter to July from 4.7 per cent to 4.8 per cent.
The metric is used in the state pension triple lock calculation, meaning the increase in April is likely to be higher than expected at 4.8 per cent.
Meanwhile, the data revealed that there are now a record 1.7 million over-65s in employment in the quarter to August, up 6.7% on the previous quarter and 11.8% higher year-on-year.
Martin Beck, chief economist at WPI Strategy, said: ‘The latest UK labour market numbers suggest the jobs market may be stabilising after a period of softening.’
He added: ‘April’s rise in employer national insurance contributions and the sharp hike in the national living wage have clearly weighed on hiring, but figures over the summer suggest the worst of the damage is passing.
‘Even so, the jobs market remains more fragile than at any time in recent years.’
Matt Swannell, chief economic adviser to the EY Item Club, said despite falling wage growth, the Bank of England will need to be convinced further that inflation pressures are easing before cutting interest rates again.
‘We don’t expect the Bank of England to cut Bank Rate again until the first half of 2026,’ he said.
