Highlights
- Unemployment rate climbs to 5 percent in the third quarter, up from 4.7 percent.
- Wage growth continues to shrink as businesses delay hiring ahead of budget.
- Weak labour data raises chances of Bank of England cutting interest rates.
The United Kingdom's unemployment rate increased more than expected to 5 percent in the third quarter, official data revealed Tuesday, marking the highest level since early 2021.
The Office for National Statistics said the rate had risen from 4.7 percent in the previous quarter. Analysts had predicted a smaller increase to 4.9 percent. The data comes just weeks before the Labour government is scheduled to present its annual budget on November (26), which is expected to include tax rises amid slow economic growth.
Liz McKeown, ONS director of economic statistics, said the number of people on payrolls is falling, with revised tax data indicating declines in most of the last 12 months.
The weak employment figures are adding to challenges for prime minister Keir Starmer’s ruling Labour party, which is trailing in popularity polls sixteen months after winning the general election. Isaac Stell, an analyst at investment manager Wealth Club, said there would be no pre-budget comfort from the data.
Wage growth shrinks
Stell noted, “Not only has the unemployment rate risen, but wage growth continues to shrink. With speculation around the budget reaching fever pitch, businesses have postponed hiring and are less likely to commit to any form of investment until they know where the economic land lies.”
Some analysts suggested the poor data may increase the chances of the Bank of England reducing its main interest rate at its next monetary policy meeting in December, providing some relief to the economy.
Finance minister Rachel Reeves has indicated that taxes will rise in the upcoming budget to help reduce government debt and fund public services.
The new figures highlight the ongoing challenges facing the UK labour market as the government seeks to balance growth, public spending, and fiscal responsibility.
