New official figures have revealed a significant weakening in the UK jobs market, with the unemployment rate climbing above a key threshold just weeks before Christmas.
Key Figures Point to a Cooling Jobs Market
The Office for National Statistics (ONS) reported that the UK unemployment rate rose to 5.1% for the three-month period from August to October. In a clear sign of reduced hiring activity, the number of employees on company payrolls fell by 22,000 in September alone. An early estimate suggests the decline accelerated, with a further drop of 38,000 payrolled employees in November.
Liz McKeown, Director of Economic Statistics at the ONS, stated that "the overall picture continues to be of a weakening labour market." She highlighted that the fall in payroll numbers and the rise in joblessness have been particularly noticeable among younger workers.
The data also showed a continued decline in job vacancies, which fell by approximately 77,000 in the three months to November compared to the same period last year. Wage growth, a key concern for the Bank of England, also showed signs of cooling. Regular pay growth, excluding bonuses, eased to 4.6% in the three months to October, down from 4.7% the previous month.
Government Response and Political Fallout
The figures present a fresh challenge for the Labour government. Work and Pensions Secretary Pat McFadden pointed to a slight 0.1 percentage point drop in the economic inactivity rate as a positive sign, but acknowledged the scale of the task. "Today's figures underline the scale of the challenge we've inherited," he said.
McFadden emphasised the government's planned investment of £1.5 billion to create 50,000 apprenticeships and 350,000 new workplace opportunities for young people. This forms part of a broader package of initiatives, including a youth work guarantee, unveiled over the past two months.
However, the opposition was quick to criticise. Andrew Griffith, the Shadow Business Secretary, argued that "Labour's bad choices are coming home to roost," citing higher National Insurance, rises in the minimum wage, and increased red tape as factors pushing up hiring costs for businesses.
Pressure Mounts on the Bank of England
The deteriorating employment situation increases pressure on the Bank of England to act. Policymakers, including Dave Ramsden, have warned that the ongoing slump in employment could deepen the UK's economic downturn.
Financial markets widely anticipate that the Bank's Monetary Policy Committee will respond by cutting interest rates to 3.75% at its upcoming meeting, which would be the lowest level in nearly three years. However, the decision remains finely balanced. New inflation data, due for release imminently, could sway the vote, particularly for Governor Andrew Bailey, who is seen as the key swing voter on the committee.
Separate surveys from S&P Global indicate the jobs market is far from recovery, with employment falling at its fastest pace since the pandemic. Against this backdrop, the government's longer-term plans for welfare reform, guided by reviews from Alan Milburn and Stephen Timms, aim to improve workforce mobility and growth, though such measures may face internal party resistance.
