Unemployment Rate Hits Five-Year High as Young Workers Struggle

Britain’s unemployment rate has climbed to its highest level in nearly five years, with young workers facing the brunt of the impact. Official data from the Office for National Statistics (ONS) indicates that the unemployment rate rose to 5.1% for the three months ending in October, up from 5% in September. This marks the highest rate since the first quarter of 2021, and if pandemic-related figures are excluded, it is the highest since early 2016.

The ONS also reported a decline in average wage growth, which fell to 4.6%. Economists attribute this downturn to uncertainty surrounding the upcoming autumn budget proposed by Chancellor Rachel Reeves, which appears to be affecting the job market. Rob Wood, chief UK economist at Pantheon Macroeconomics, noted that “budget chaos has hit job growth in the past few months as firms seem to have delayed decision-making.”

The challenging hiring climate is particularly evident for younger individuals. Between July and October, there was an increase of 85,000 unemployed individuals aged 18 to 24, highlighting the difficulties faced by this demographic. Sanjay Raja, chief UK economist at Deutsche Bank Research, expressed concern over the ongoing labor market issues, stating, “Worrying signs in the labour market continue as we head towards Christmas. Peak budget uncertainty has seemingly impacted hiring plans.”

In response to the rising unemployment, Paul Nowak, general secretary of the Trades Union Congress (TUC), urged the Bank of England to consider cutting interest rates. He believes that such a move would stimulate household spending and facilitate investment by businesses.

Work and Pensions Secretary Pat McFadden announced that former health secretary Alan Milburn is leading an investigation into the challenges faced by young people out of work. McFadden emphasized that while there are over 350,000 more individuals in employment this year and the inactivity rate is at its lowest in over five years, the latest figures underscore the significant challenges that persist in the job market.

As the economic landscape continues to evolve, the focus remains on how policymakers can effectively address these rising unemployment figures, particularly among younger workers, to foster a more robust job market in the coming months.