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UK unemployment rate hits four-year high
The United Kingdom's jobless rate rose to 5.1% in the August-to-October period, up from 4.3% a year earlier, according to official figures released on Tuesday. The increase marks the highest level since January 2021 and reflects a steady deterioration in the labour market.
Young workers bear the brunt
The Office for National Statistics (ONS) reported that unemployment among 18- to 24-year-olds jumped by 85,000 in the three months to October, the sharpest rise since November 2022. Business leaders warn that government plans to eliminate the lower minimum-wage tier for younger workers may further discourage hiring in entry-level roles.
Kris Gumbrell, CEO of the Brewhouse and Kitchen pub chain, said the hospitality sector feels "punished" by recent policies. He noted that a recent front-of-house job posting attracted 200 applications within hours, illustrating the fierce competition for positions.
"It's young people who have suffered the most. The government's new apprenticeship plans simply don't fit our industry."
Kris Gumbrell, CEO, Brewhouse and Kitchen
Hiring slowdown and wage trends
The ONS data, which predates the latest Budget, suggests many employers paused recruitment to await clarity on taxation and spending plans from Chancellor Rachel Reeves. Firms also cited lingering effects from last year's national insurance increases, which raised hiring costs.
Payroll numbers fell by 149,000, or 0.5%, in October compared with the same month in 2024. Despite this, wage growth outpaced inflation, with average earnings rising 4.6% excluding bonuses. However, the gap between public and private sector pay widened: private-sector wage growth slowed to 3.9%, while public-sector earnings accelerated to 7.6%.
Policy responses and economic outlook
The Department for Work and Pensions announced a review led by former Health Secretary Alan Milburn to investigate rising youth unemployment. A panel of experts, dubbed a "coalition of the concerned," will examine the surge in young people not in education, employment, or training.
Secretary of State for Work and Pensions Pat McFadden acknowledged the "scale of the challenge" and highlighted a £1.5 billion investment to create 50,000 apprenticeships and 350,000 workplace opportunities for young people. Meanwhile, the opposition criticised the government's "growth-killing policies," warning of prolonged hardship for families.
Bank of England poised for rate decision
The Bank of England is set to announce its interest-rate decision on Thursday, with economists increasingly expecting a cut. Yael Selfin, chief economist at KPMG UK, said the labour-market data "should be sufficient to justify a rate cut this week."
However, inflation remains at 3.6%, above the Bank's 2% target. Lower rates could stimulate borrowing but risk reigniting price pressures. Richard Carter, head of fixed interest research at Quilter Cheviot, described the Bank's position as "walking a tightrope" between fostering growth and controlling inflation.
The ONS will release updated inflation figures on Wednesday, which could influence the Bank's decision.
"Should inflation come in lower as expected tomorrow, a rate cut could well be ticked off everyone's Christmas list."
Richard Carter, Quilter Cheviot
Personal struggles amid job scarcity
Meerah Nakaayi, 22, from London, has been unemployed since June despite completing a two-year apprenticeship and working in policy for two years. She described the job hunt as "incredibly frustrating and demotivating."
"My last interview feedback stated they had 290 applications for a niche policy analyst role. That shows how competitive it really is."
Meerah Nakaayi, job seeker
James Reed, CEO of Reed Recruitment, told BBC Radio 4 that "the economics of hiring at entry level is becoming less and less appealing to employers."
