UK unemployment rises to highest in nearly four years

The unemployment rate in the UK has risen to its highest level in almost four years, according to official figures, as the jobs market continues to slow.

The Office for National Statistics (ONS) said the rate was 4.5% in first three months of this year, up 0.2% on the previous quarter and the highest reading since summer 2021.

The higher level of unemployment was part of a slew of UK labour market data released on Tuesday that showed a slowdown amid increases to employer national insurance contributions (NICs) and the national living wage.

The number of vacancies in the economy was down 5.3% in the quarter to April, the ONS said. There were 761,000 job vacancies in the three months to April, a 131,000 drop on a year ago. The biggest decline in vacancies was seen in the construction sector.

Pay growth also weakened, with regular earnings up 5.6% in the three months to March, down from 5.9% in the previous three-month period.

Modestly weaker wage growth will reassure Bank of England policymakers, who cut interest rates by a quarter point last week to 4.25% but have expressed concern about the continued strength of pay.

And in another sign of a slowing labour market, the number of payrolled jobs declined, by 47,000, or 0.2%, between February and March.

The economic inactivity rate, which has been a consistent concern of policymakers, was slightly lower, at 21.4% of the working age population – though remains above the levels seen before the Covid pandemic.

The Bank also been monitoring closely the impact on jobs and salaries of Rachel Reeves’s £25bn increase in employer NICs. The rise, which took effect last month, came alongside a 6.7% increase in the national living wage, prompting some business lobby groups to warn about rising payroll costs.

The ONS is facing an independent inquiry into longstanding problems with the quality of its data, including the Labour Force Survey, which has been hit by collapsing response rates. The national statistician, Ian Diamond, stepped down last week, citing health concerns.