UK Unemployment Rate Drops Sharply to 4.9%
The UK unemployment rate has fallen unexpectedly to its lowest level since last summer, according to official figures released by the Office for National Statistics (ONS). The rate dropped sharply to 4.9% in the three months to February, down from 5.2% in the three months to January. This decline surprised most economists, who had anticipated the jobless rate to remain unchanged.
Rise in Inactivity Drives Unemployment Fall
The ONS reported that the fall in unemployment was primarily driven by a significant rise in inactivity within the jobs market. Inactivity increased by 70,000 in the quarter, with data suggesting fewer students seeking work alongside their studies. Liz McKeown, ONS director of economic statistics, noted, "Alongside falling unemployment, the number of people not actively seeking work increased."
Wage Growth Slows to Lowest Rate in Over Five Years
Average regular wage growth continued to slow, dropping to 3.6% in the three months to February, down from 3.8% in the previous three months. This marks the lowest level of wage growth since November 2020. While earnings are still outstripping inflation, with a real growth of 0.4% when adjusted for the Consumer Prices Index (CPI), this represents the lowest real growth in more than two-and-a-half years.
Vacancies Plunge to Lowest Level Since April 2021
Job vacancies also saw a sharp decline, falling by 29,000 in the three months to 711,000. This is now the lowest level of vacancies since April 2021, indicating a cooling in the labour market. McKeown added, "Regular wage growth has slowed further with growth at its lowest rate in over five years."
Caution Advised Due to Data Collection Overhaul
The ONS has cautioned that these figures should be treated with care, as they come amid an overhaul to the way the data is collected. More timely estimates show the number of workers on UK payrolls dropped by 11,000 month on month in March to 30.3 million, following a 6,000 drop in February. This is subject to revision, and the ONS had previously estimated a 20,000 rise in February.
The mixed signals from the labour market highlight ongoing challenges, with falling unemployment masked by rising inactivity and slowing wage growth, suggesting underlying weaknesses in job market dynamics.
