Labour Market Outlook | Unemployment rises, vacancies fall to five-year low & wage growth weakens

The UK labour market showed fresh signs of deterioration in the latest Office for National Statistics figures released this morning, with unemployment rising unexpectedly and vacancies moving in the opposite direction.

The unemployment rate rose to 5% in the three months to March, up from 4.9%, marking the highest level since 2015 and defying expectations that the rate would hold steady. At the same time, job vacancies fell by 28,000 to 705,000 between February and April, taking openings to their lowest level in five years. 

More up-to-date payroll data also pointed to weakness, with the number of payrolled employees dropping by 100,000 in April, the sharpest monthly fall since records began in 2014 outside the pandemic. Wage growth continued to slow, with regular pay rising by 3.4% annually and total pay growth at 4.1%, leaving real pay growth hovering just above zero at 0.3%.

The figures suggest a labour market that is cooling more quickly than anticipated, as businesses grapple with higher employment costs, geopolitical instability and weakening confidence. Young workers appear to be feeling the pressure particularly acutely, with unemployment among 18 to 24-year-olds rising to 14.7%, its highest level in more than a decade.