The UK unemployment rate has unexpectedly gone up while the number of job vacancies has fallen to its lowest level in five years as the initial impact of the Iran war on firms starts to be seen.<\/p>\n
The unemployment rate rose slightly to 5% in the three months to March from 4.9% in the three months to February, according to the Office for National Statistics (ONS).<\/p>\n
Average regular earnings growth fell to 3.4% in the first three months of the year, and was 0.3% higher after inflation was taken into account.<\/p>\n
Analysts said the figures show the first effects of the Middle East war on the jobs market, and warned that demand for workers would likely continue to weaken the longer the conflict goes on.<\/p>\n
Early ONS estimates suggest the number of job openings fell by 28,000, or 3.9%, to 705,000 between February and April, its lowest level since April 2021.<\/p>\n
“Lower-paying sectors such as hospitality and retail have seen some of the largest falls in vacancies and payroll numbers, both in recent months and over the last year,” ONS director of economic statistics Liz McKeown said.<\/p>\n
According to the ONS, the number of people on payrolls in April also fell. Payroll employment figures dropped by 100,000 last month.<\/p>\n
McKeown pointed out the figures come at the start of the new tax year, and they “carry greater uncertainty and have often seen larger than average upward revisions”.<\/p>\n
But Richard Carter, head of fixed interest research at Quilter Cheviot, said the outlook suggested a similar pattern of falling payroll number could continue “for some time”.<\/p>\n
“Today’s figures only capture the initial effects of the conflict, and the full impact will become more apparent in the coming months as higher costs and the potential for weaker consumer demand begin to filter through,” he said.<\/p>\n
Suren Thiru, chief economist for chartered accountants in England and Wales body ICAEW, said the jobs figures showed there was a “growing distress within the UK’s labour market”.<\/p>\n
“The continued fall in job vacancies is a worrying sign of the strength of the labour market as it suggests that demand for staff is deteriorating quickly amid global headwinds and the growing financial squeeze on firms,” he said.<\/p>\n
The drop in vacancies suggests businesses are pausing recruitment, said Patrick Milnes from the British Chambers of Commerce.<\/p>\n
“This is unsurprising as labour costs remain a key concern,” he added.<\/p>\n
Kate Nicholls, chief executive of UK Hospitality, said the rise in unemployment was “directly linked to changes in employment taxes, costs and regulations”.<\/p>\n<\/p><\/div>\n
‘Particularly difficult’ for young people <\/h2>\n
A higher unemployment rate means more people are out of work and looking for work, while a fall in the number of job vacancies means there are fewer jobs to compete for.<\/p>\n
Ben Harrison, director of the Work Foundation at Lancaster University, said this was making life “particularly difficult” for young people as the youth unemployment rate has reached 14.7%, its highest since late 2014.<\/p>\n
Separate research published by the Institute for Fiscal Studies on Tuesday shows the current fall in youth employment rates is approaching the level of decline seen during the 2008 financial crisis and the Covid-19 pandemic.<\/p>\n
The IFS data relates to a different time period to the latest jobs and wages data.<\/p>\n
It suggests between December 2022 and December 2025, the proportion of 16 to 24-year-olds in payrolled work fell from 54.9% to 50.6%.<\/p>\n
Jed Michael, a research economist at the IFS, said the current trend was concerning because “we know that unemployment early in one’s career can have lasting negative consequences”.<\/p>\n
Jonathan Townsend, UK chief executive of the The King’s Trust charity, said the IFS’s research indicated that “we cannot simply assume the problem will correct itself as economic conditions improve.<\/p>\n
“We urgently need to understand what is pulling more young people away from work and education, including the role of mental health.”<\/p>\n