Rachel Reeves will insist her economic plan is working today after unemployment saw a surprise fall – but only before the Middle East crisis erupted.
The UK jobless rate dipped to 4.9 per cent in the three months to February, down from 5.2 per cent in the three months to January and its lowest level since last summer.
However, the ONS said that was largely driven by a rise in numbers classed as inactive and not looking for work.
The more recent signs were also gloomy, with numbers on payrolls down 11,000 in March to 30.3million – 65,000 lower than a year before – while vacancies have dropped to a five-year low.
Pay rises have also been slowing dramatically, although public sector workers have been doing better than the private sector after Labour’s bumper settlements.
Most economists had expected the jobless rate to remain unchanged.
The ONS said the fall was driven by a rise in inactivity, especially among students, which rose 70,000 in the quarter.
It also cautioned the figures should be treated with caution given an overhaul to the way they are collected.
The UK jobless rate dipped to 4.9 per cent in the three months to February, its lowest level since last summer
The more recent signs were also gloomy, with numbers on payrolls down 11,000 in March to 30.3million, 65,000 lower than a year before
Vacancies have dropped to a five-year low
The figures showed average regular wage growth dropped further, to 3.6 per cent in the three months to February, down from 3.8 per cent in the previous three months and remaining at the lowest level since November 2020.
Earnings are still outstripping inflation, rising by 0.4 per cent with the Consumer Prices Index (CPI) taken into account, but this is the lowest real growth for more than two-and-a-half years.
Vacancies also plunged by 29,000 in the three months to 711,000 – now the lowest level since April 2021.
Liz McKeown, ONS director of economic statistics, said: ‘Alongside falling unemployment, the number of people not actively seeking work increased, with data suggesting fewer students seeking work alongside their studies.
‘Regular wage growth has slowed further with growth at its lowest rate in over five years.’
The data comes amid fears of a spike in unemployment as the Iran war takes its toll on the UK economy, with the Item Club forecasting the jobless rate will surge to 5.8% by the middle of 2027, with almost 250,000 more people without a job.
The Chancellor is due to update MPs on the response to the Middle East turmoil later on Tuesday, as the Government unveils measures aimed at weakening the link between global gas market prices and the cost of UK electricity.
Ms Reeves will hike the Government’s windfall tax on low-carbon electricity generators from 45 per cent to 55 per cent to raise Treasury funds that will be used to support consumers and businesses with the rising costs in the short term.
The so-called electricity generator levy was introduced in 2022 to target the excess profits being made by nuclear, biomass and renewable energy projects built before 2017 as electricity prices soared after Russia’s invasion of Ukraine.
The Government is also proposing a voluntary move by these ‘legacy’ clean power generators, which supply around a third of Britain’s power, on to fixed-price contracts to help protect consumers from volatile prices.
It is hoped the contracts will deliver benefits on consumers’ bills over the next 12 months, though officials are not yet able to say what savings could be delivered.
And ministers said they will also increase support available for households on heating oil and liquified petroleum gas to transition to lower-carbon alternatives by increasing the boiler upgrade scheme grants to a total of £9,000.
Other measures to be set out on Tuesday to help cut bills include:
- Further details on so-called transitional energy certificates, which will provide industry looking to invest in North Sea drilling with greater clarity over already-explored areas near near existing licensed fields.
- Providing an additional £100 million, on top of the £1.2 billion pledged to deliver energy upgrades to 100,000 social homes, to boost the delivery of solar installations.
- Backing efforts to install solar panels on a further 100 schools and colleges this year.
- Driving forward plans to expand renewables across the Public Estate – including using brownfield land, industrial sites and railway sites to host solar panels and wind turbines.
- Streamlining outdated rules to unblock the electricity grid queue and speed up clean power.
- And plans to make EV chargers, solar panels and heat pumps easier to install for renters, flat-dwellers and households without a driveway.
The Chancellor is due to update MPs on the response to the Middle East turmoil later
Commenting on the ONS figures, Work and Pensions Secretary Pat McFadden said: ‘These figures show that there was an improvement in the labour market at the beginning of the year with unemployment falling below 5 per cent, and 332,000 more people in work than a year ago.
‘But we cannot escape the effects of the war in the Middle East which are likely to feed through to prices and employment in the coming months.
‘We will do everything we can to support the country through this period, including by slashing energy bills by up to 25 per cent for 10,000 manufacturers.
‘And we’re focusing on future proofing and upskilling our workforce through our £2.5billion investment to get more young people earning and learning alongside personalised support to help sick or disabled people who had previously been written off.’
Shadow work and pensions secretary Helen Whately said: ‘This month’s dip in unemployment is outweighed by the rise in people who are economically inactive, who have left the labour market altogether.’
The senior Tory MP added: ‘Labour’s taxes and red tape have killed opportunity for many thousands of people.’
