UK unemployment rises to highest level in nearly four years
Unemployment in the UK rose in April to the highest level in almost four years, official figures showed, as tax increases introduced by Rachel Reeves added to a broader slowdown in the jobs market.
In a blow for the chancellor before Wednesday's spending review, the Office for National Statistics (ONS) said the jobless rate increased to 4.6% in the three months to the end of April, up from 4.5% on the previous three-month period, to hit the highest level since summer 2021.
Annual growth in regular wages slowed to 5.2% from a revised 5.5%, below City economists' forecasts for a reading of 5.3%.
Related: US-China trade talks to resume; UK jobs market 'weakening' as payrolls tumble – business live
Liz McKeown, the ONS director of economic statistics, said: 'There continues to be weakening in the labour market, with the number of people on payroll falling notably. Feedback from our vacancies survey suggests some firms may be holding back from recruiting new workers or replacing people when they move on.
'Earnings growth has slowed in both cash and real terms, though it remains strong by historic standards. Public sector pay is now growing at a higher rate than wages in the private sector.'
Unemployment is measured using the ONS's widely criticised labour force survey, which has suffered from collapsing response rates. Experts have argued this leaves policymakers 'flying blind', with the prospect that decisions are being taken based on flawed data.
However, separate figures showed the number of workers on UK company payrolls collapsed at the fastest rate since the height of the Covid pandemic, with a monthly drop of 109,000 in May. Vacancies also fell by 63,000 over the three months to the end of May.
The latest snapshot gives the first indication of the impact of Reeves's £25bn rise in employer national insurance contributions (NICs) introduced from April, affecting almost 1m businesses, as well as a 6.7% rise in the national living wage.
Highlighting the pressure on the chancellor before her highly anticipated spending review, the figures showed the number of employees on payroll has fallen by 276,000 since Reeves's October budget.
Suren Thiru, the economics director at the Institute of Chartered Accountants in England and Wales, said: 'These figures suggest that the UK's jobs market took a damaging hit from 'Awful April', with the tough reality of sharply rising NICs and national living wage costs pushing more employers to cut staff.
'The UK's labour market is in a painful period with eye-wateringly high business costs likely to mean more job losses this year, particularly if the spending review increases the odds of more tax hikes in the autumn budget.'
Businesses in typically lower-paying sectors, including hospitality, leisure and retail, had warned jobs could be hit. Andrew Griffith, the shadow business secretary, said the increase in unemployment was 'disappointing but no surprise'.
It comes as the Bank of England monitors the jobs market for signs of weaker conditions as policymakers consider whether to cut interest rates further after four earlier reductions in borrowing costs to 4.25%.
Threadneedle Street is widely expected to keep rates on hold next week amid heightened uncertainty over the impact of Donald Trump's increasingly erratic trade wars on the world economy.
Economists said the sharper-than-expected slowdown in wage growth could encourage the Bank to cut borrowing costs by a further quarter of a percentage point at the following meeting in August. The pound fell by about 0.5% against the US dollar after the data.
James Smith, a developed markets economist at ING, said: 'The UK jobs market might be turning a corner – and not in a good way.
'If nothing else, this should help cement another rate cut in August and further quarterly cuts in November and into 2026. We wouldn't totally rule out the Bank moving faster, particularly because we are more upbeat about the inflation outlook.'
Despite the rise in unemployment, separate figures showed the rate of economic inactivity – when working-age adults are neither in a job or looking for one – fell by 0.2 percentage points to 21.3%.
Alison McGovern, the employment minister, said the government was putting in place more help for jobseekers. 'Supporting more people into work and putting more money in the pockets of working people is at the heart of our plan for change,' she said.
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