Unemployment rate hits six-month high amid fears of a stalling economy

Britain’s unemployment rate has risen to its highest level in six months in the latest sign that fears of a stalling economy is affecting the UK jobs market.

The Office for National Statistics (ONS) said the jobless rate jumped to 4.2 per cent in the three months to February - the highest level for nearly six months and up from 3.9 per cent in the three months to January.

Meanwhile, the rate of people with a job dipped to 74.5 per cent and the economically inactive, who are those not in work or looking for employment, increased to 22.2 per cent.

The ONS said there are “tentative signs that the jobs market is beginning to cool”.

“Recent trends of falling vacancy numbers and slowing earnings growth have continued this month albeit at a reduced pace,” said ONS Director of Economic Statistics Liz Mckeown.

“But with the rate of inflation also slowing, real earnings growth has increased and is now at its highest rate in nearly two and a half years.

The UK economy is estimated to have increased by 0.1 per cent in 2023, following growth of 4.3 per cent in 2022, with economists expecting an anaemic 0.3 per cent growth this year.

Experts said the weaker-than-expected employment figures reinforce the case for the Bank of England to cut interest rates, possibly as early as June.

Rob Wood, chief UK economist at Pantheon Macroeconomics, said: “There is solid evidence the labour market slowed markedly in March. Rate-setters will take note.

“Wages lag labour market slack, so these figures will likely embolden the Monetary Policy Committee to begin cutting interest rates this summer.”

More timely data from HM Revenue & Customs also revealed that the number of workers on payrolls fell by 67,000, or 0.2 per cent, to 30.3 million in March.

This is the biggest drop since the quarter to November 2020 at the height of the pandemic, although the figures are estimates and subject to revision.

Vacancies likewise fell, down for the 21st period in a row, from 13,000 quarter on quarter to 916,000 in the first three months of 2024.

The data comes after the UK fell into recession at the end of last year, although it is thought this may prove short-lived, with recent output data suggesting the economy is heading for growth overall in the first quarter.

The official figures also showed regular wages growth, excluding bonuses, falling back once again, to 6 per cent in the three months to February from 6.1 per cent in the previous three months.