UK unemployment jumps to six-month high after economy cools

Britain’s unemployment rate rose unexpectedly to the most in six months as the number of jobs in the economy shrank, an indication of cooling in the once red-hot labour market.

The jobless rate rose to 4.2 per cent in the three months through February after a reading of 3.9 per cent in the previous period, the Office for National Statistics (ONS) said on Tuesday (Apr 16). It was the biggest jump since 2020, when the country was emerging from pandemic lockdowns.

The figures provided a tentative sign that inflationary pressures in the jobs market are cooling. But the report also showed wage growth, which the Bank of England is watching carefully, remained stubbornly high, easing to 6 per cent. That was only slightly down from the 6.1 per cent reading previously and above the expectations of economists.

The policymakers have been reluctant to signal a shift away from their fight against inflation because of concerns that continued strong pay growth will fuel price rises. 

The pound slipped back 0.2 per cent against the dollar to US$1.2422 following the release.

Financial markets have scaled back bets on lower borrowing costs coming from the next two BOE meetings. Unexpectedly strong US inflation data and warnings from BOE hawks about similar risks remaining in the UK prompted the shift.

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The BOE is having to judge the tightness of the labour market at a time when the official data has been mired by a plunge in survey response rates. The ONS has urged caution on interpreting employment, unemployment and inactivity problems due to problems with the labour force survey that underpins the figures. BLOOMBERG