Fresh blow for Chancellor Rachel Reeves as unemployment rate hits highest level since early 2021
Britain’s jobless rate has surged to its highest level for more than four-and-a-half years and wage growth has slowed further as the labour market continues to weaken, according to official figures.
Latest data from the Office for National Statistics (ONS) showed a worse-than-expected rise in the rate of unemployment, to 5% in the three months to September, up from 4.8% in the three months to August and the highest level since early 2021.
This was more than the 4.9% expected by most analysts, according to Pantheon Macroeconomics.
The ONS said average regular wage growth also pulled back again, to 4.6% in the three months to September, down from 4.7% in the previous three months, and was 0.8% higher after taking Consumer Prices Index (CPI) inflation into account.
Wage growth is now the lowest seen since April 2022.
In further evidence of a tough jobs market, the ONS said the number of workers on UK payrolls fell by 32,000 during October to 30.3 million, following a 32,000 drop the previous month.
ONS director of economic statistics Liz McKeown said: “Taken together these figures point to a weakening labour market.
“The number of people on payroll is falling, with revised tax data now showing falls in most of the last 12 months.
“Meanwhile the unemployment rate is up in the latest quarter to a post-pandemic high.”
Martin Beck, chief economist at WPI Strategy, said: “Signs of renewed weakness in the UK labour market suggest the real economy is starting to feel the chill of Budget tax uncertainty.
“With pay growth slowing further, the data strengthen the case for the Bank of England to cut interest rates next month.”
He warned that the “prospect of new tax rises in the upcoming Budget poses further risks to employment, particularly if the Chancellor again looks to raise taxes on businesses”.
He added: “But this time, Rachel Reeves is more likely to target earners rather than employers.
“While the combination of higher taxes and softer wage growth could weigh on household spending, the prospect of falling inflation and the growing likelihood of a December rate cut, with more cuts to follow in 2026, should help cushion the jobs market and the economy.”