UK Unemployment Rate Dips to 4.9% in February, Wage Growth Slows to Five-Year Low

The UK unemployment rate saw an unanticipated decrease to 4.9% in the three months ending February. This figure contrasts with forecasts that projected it would hold steady at 5.2%.

The Office for National Statistics (ONS) data indicates that this fall was primarily attributable to an uptick in economic inactivity, specifically an increase in individuals not actively seeking employment and therefore excluded from unemployment calculations. Liz McKeown, ONS director of economic statistics, noted that a contributing factor was fewer students looking for work alongside their studies.

Concurrently, annual wage growth between December and February registered 3.6%, representing the slowest rate observed since late 2020. Despite this slowdown, real wages continued to rise faster than inflation.

Further ONS figures reveal that payrolled employment decreased by 11,000 in March, providing the first data point covering the period of the Iran war. Job vacancies also experienced a decline, reaching their lowest level in nearly five years, with 711,000 positions available from January to March.

Yael Selfin, chief economist at KPMG UK, commented that while the jobs market appeared to stabilise in February, a reversal might be imminent. Selfin warned that unemployment is likely to trend upwards in the coming months as businesses reduce hiring in response to escalating costs and diminished demand, particularly given the broader geopolitical climate impacting global economic conditions.