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Unemployment climbs as vacancies drop to lowest since 2021
The UK's unemployment rate edged up to 5% in the three months to March, marking a slight increase from 4.9% in the previous quarter, according to official figures released Tuesday. Meanwhile, job vacancies fell to 705,000-the lowest level in five years-as the economic impact of the Iran war begins to ripple through the labor market.
War in Middle East weighs on hiring
Analysts attributed the shift to the early effects of the Iran conflict, warning that demand for workers could weaken further if the war persists. The Office for National Statistics (ONS) reported a 3.9% decline in vacancies between February and April, with sectors like hospitality and retail experiencing the steepest drops in both job openings and payroll numbers.
Liz McKeown, ONS director of economic statistics, noted that the April payroll figures-showing a 100,000 drop-carry "greater uncertainty" due to the start of the new tax year and potential revisions.
Wage growth slows, easing pressure on Bank of England
Average regular earnings grew by 3.4% in the first quarter, but after accounting for inflation, real wage growth was just 0.3%. While cooling pay growth typically fuels expectations of interest rate cuts, experts cautioned that inflation concerns may keep rates elevated.
"Pressure is building for rates to stay higher for longer,"
Susannah Streeter, Chief Investment Strategist at Wealth Club
Sanjay Raja, chief UK economist at Deutsche Bank, suggested the data could allow the Bank of England's Monetary Policy Committee to maintain current rates while monitoring the war's economic impact.
Youth unemployment hits decade-high, raising long-term concerns
The unemployment rate for 16- to 24-year-olds surged to 14.7%, its highest level since late 2014. Separate research by the Institute for Fiscal Studies (IFS) revealed that the proportion of young people in payrolled work fell from 54.9% to 50.6% between December 2022 and December 2025-a decline approaching levels seen during the 2008 financial crisis and the COVID-19 pandemic.
"Unemployment early in one's career can have lasting negative consequences,"
Jed Michael, Research Economist at IFS
Jonathan Townsend of The King's Trust emphasized the need to address barriers like mental health that may be pulling young people away from work and education.
Political reactions and economic outlook
Work and Pensions Secretary Pat McFadden acknowledged the "shadow" cast by the Iran war on the labor market but highlighted a net increase of 416,000 workers over the past year. Shadow Business Secretary Andrew Griffith blamed employment tax rises for piling costs onto businesses, while Ben Harrison of the Work Foundation warned of "particularly difficult" conditions for young job seekers.
Inflation data due Wednesday is expected to show a slight dip from March's 3.3% annual rate.
