The UK’s unemployment decreased unexpectedly in the three months to February.
It fell to 4.9%, the Office of National Statistics, and went against predictions that it would remain at 5.2%.
The fall was driven by an increase in those not actively seeking work.
ONS director of economic statistics Liz McKeown said:
“The number of workers on payroll remained broadly flat in recent periods, reflecting ongoing weak hiring.”
“Vacancies fell to their lowest level in almost five years, but with unemployment also falling the number of vacancies per unemployed person remains broadly unchanged.”
“Alongside falling unemployment, the number of people not actively seeking work increased, with data suggesting fewer students seeking work alongside their studies.”
“Regular wage growth has slowed further with growth at its lowest rate in over five years.”
Reaction to fall in unemployment
Patrick Milnes, head of people and work, British Chambers of Commerce:
“While unemployment has seen a surprise fall to 4.9%, the expectation is that it will rise this year as business uncertainty caused by the Iran War overshadows the UK economy.
“With the cost of employment also high, and expected to rise as the Employment Rights Act comes into effect, our latest forecast expects unemployment to hit 5.5% this year. The slow–down in wage growth indicates businesses are taking their foot off the gas and the labour market will continue to loosen.
“With the conflict in Iran likely to drive higher inflation and weaken growth, the spectre of stagflation is beginning to grow.
“This has upended expectations at the start of the year of further interest rate cuts by the Bank of England, increasing the level of uncertainty still further.
“The government must move swiftly to show that it understands the problems firms face. Action to ease the cost burdens they face, such as help with electricity bills and reform of business rates would go a long way to demonstrating this.”
Alex Hall-Chen, principal policy advisor for employment, Institute of Directors:
“Today’s data reflects ongoing stagnation in employer demand for labour, with payrolled employees down by 11,000 on the month and vacancies down by 3.9% on the quarter. Whilst the unemployment rate has decreased on the quarter, this appears to be linked to increasing rates of economic inactivity, rather than job creation.
“A cocktail of increased employment costs and regulations, coming at a time of record low business confidence, has made hiring new staff a significantly less attractive proposition for employers.
“In its recent response to the consultation on the new right of trade unions to access workplaces, the government missed an opportunity to demonstrate to employers that it’s taking a pragmatic approach to implementing the Employment Rights Act. With little to no evidence that employer concerns are being listened to in the development of secondary legislation, employer confidence in hiring continues to be undermined by the reforms.
“If the government is serious about reversing the decline in job creation, it must change course and demonstrate a willingness to make its employment reforms workable by finding solutions via meaningful negotiations with employers.”
James Cockett, senior labour market economist, CIPD:
“Today’s fall in unemployment marks a reprieve from the recent doom and gloom about the labour market. However, it’s likely that this will be short-lived. The latest data cover the period to the end of February, but since then global uncertainty has increased, which in a very short space of time has driven up business costs for employers in the UK. This shock is likely to lead to rising unemployment over the coming months.
“On top of geopolitical instability, April has seen a number of the key reforms in the Employment Rights Act coming into force. These measures, alongside the increase to the National Minimum Wage, have also increased the cost of employing people. The government needs to engage with businesses on the measures in the Employment Rights Act still to be decided in secondary legislation to ensure these don’t push up business costs further.
“Pay growth is continuing to fall, having reached its lowest level since the end of 2020. But employers will likely see staff bidding for higher awards as the cost of living creeps up once again.”