UK unemployment rate rises as wage growth slows
by Henry Moore · LBCBy Henry Moore
Britain’s unemployment rate rose more than expected as wage growth fell to its lowest level in two years.
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According to the Office for National Statistics (ONS), the rate of UK unemployment rose to 4.3% in the three months leading to September, up from 4% in the previous three months.
This marks a stark increase from the 4.1% predicted by economists.
Average regular earnings growth eased back to 4.8% in the three months to September, down from 4.9% in the previous three months, the ONS added.
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This marks the lowest level of wage growth in the UK since June 2022.
Liz McKeown, ONS director of economic statistics, said: "Growth in pay excluding bonuses eased again this month to its lowest rate in over two years.
"The number of people on payrolls fell slightly in September and while it remains up on the year, annual growth continues to slow.
"The labour force survey estimates show a different picture, however, we continue to advise caution when interpreting short-term changes in these estimates, as the improvements to data collection introduced at the beginning of the year are still feeding through.
"Job vacancies have fallen again, as they have been doing for more than two years now."
Ben Harrison, Director of the Work Foundation at Lancaster University, said Britain must address its long-term sickness crisis if it wants to get people back to work.
He said: “If the UK Government is to meet its intended 80% employment rate, it must act to address the high levels of long-term sickness that are keeping too many people out of the jobs market. Despite unemployment being at historically low levels, the UK has had over 2.7 million people out of the labour market due to long-term sickness since May-July 2023.
“Taken together, the forthcoming Get Britain Working White Paper and Employment Rights Bill represent a big opportunity to support more people into sustained and secure employment – but only if the Government sticks to its guns on the direction and strength of reforms.
“The emphasis must be on de-risking remaining in and returning to work for those with long-term health conditions. That means strengthening the UK’s meagre statutory sick pay system that forces some to work while ill, boosting access to flexible working from day one of employment, and shifting the focus of the welfare system away from punitive sanctions and towards more tailored, long-term employment support.”
Jack Kennedy, Senior Economist at global hiring and matching platform Indeed, added: “The UK labour market continues to gradually cool, with vacancies and wage growth declining further. Though some forecasters have recently upgraded the UK’s growth outlook, the labour market faces several headwinds heading towards 2025 and employers are likely to remain cautious in their hiring decisions.
“While the Bank of England cut interest rates last week, it struck a cautious tone on further reductions. It was already wary of persistent service sector inflation and stubborn wage growth. The potential inflationary impacts of the Budget’s expansionary fiscal measures and possible US trade tariffs under a Trump presidency have reinforced that caution. A slower pace of interest rate cuts could translate into weaker hiring, while the rise in employer National Insurance Contributions announced in the Budget presents a further headwind.”