Britain's labour market weakened significantly in the run-up to the Autumn Budget, with official statistics revealing a troubling rise in unemployment, particularly among young people. The Office for National Statistics (ONS) reported the unemployment rate climbed to 5.1% for the three months to October, marking the highest level since the first quarter of 2021 during the pandemic.
Budget Uncertainty Chills Hiring
Economists point directly to the uncertainty surrounding the government's fiscal plans as a key factor behind the slowdown. The November 26 Budget created a climate of hesitation, causing many firms to pause hiring decisions. This follows data showing a surprise 0.1% contraction in the economy for October, also attributed to pre-Budget jitters.
Rob Wood, chief UK economist at Pantheon Macroeconomics, stated that "Budget chaos has hit job growth in the past few months as firms seem to have delayed decision-making." Sanjay Raja of Deutsche Bank Research echoed this, noting "Peak Budget uncertainty has seemingly impacted hiring plans."
Youth Employment Crisis Deepens
The data paints a particularly stark picture for younger workers. The ONS reported an increase of 85,000 unemployed individuals aged 18 to 24 in the three months to October. This is the largest quarterly rise for this group since November 2022.
The crisis extends beyond this age bracket. Unemployment also jumped by 47,000 for those aged 25-34 and by 28,000 for 16 and 17-year-olds. The number of young people classified as Neets (not in employment, education, or training) has been rising since 2021 and is now at its highest level since 2014.
In further evidence of a softening market, the provisional estimate for employees on payrolls in November showed a plunge of 38,000 – the biggest single-month fall in five years. Vacancies also dipped slightly, and redundancies increased by nearly 50% to 156,000.
Wage Growth Cools, Rate Cut Hopes Rise
Alongside rising joblessness, the pace of pay growth is slowing. Average regular wage growth eased to 4.6% in the three months to October, down from a revised 4.7%. After adjusting for Consumer Prices Index (CPI) inflation, real pay growth stood at 0.9%.
This cooling in wage pressures, combined with the weak employment data, is strengthening the case for the Bank of England to cut interest rates. Experts suggest the Monetary Policy Committee could lower the base rate from 4% to 3.75% at its upcoming meeting, with Wednesday's inflation figures being a final key piece of evidence.
Martin Beck, chief economist at WPI Strategy, said: "The latest UK labour market data delivered a fresh set of worrying signals... the figures will provide another reason for the Bank of England... to back an interest rate cut this week."
Responding to the figures, Work and Pensions Secretary Pat McFadden acknowledged the scale of the challenge, stating the government had commissioned former Labour minister Alan Milburn to lead an investigation into youth inactivity and work.
