UK jobs market weakens as unemployment rises to 5%

What's happened

Official data show the UK unemployment rate has risen to 5% in the three months to March, with pay growth slowing to 3.4% and a sharp 100,000 fall in payroll employees in April. Vacancies have dropped to a five-year low as firms in retail and hospitality curb hiring amid economic and geopolitical uncertainty linked to the Iran war and rising energy costs.

What's behind the headline?

Analysis

• The latest ONS figures have the economy facing higher headwinds from the Iran war and energy-price shocks, yet wage growth remains only modest.
• This will likely keep the Bank of England on hold for longer, as policymakers weigh whether wage pressures will re-ignite inflation.
• Retail and hospitality are leading the slowdown, with vacancies and payrolls plunging the most, suggesting limited near-term job creation in consumer services.
• Youth unemployment has risen notably, underscoring risks to youth employment programmes and social mobility efforts.
• Traders and households should expect continued volatility as global energy prices and geopolitical risk persist.

How we got here

ONS data show a soft labour market after a year of resilience, with weaker wage growth and a sharp payrolls fall, reflecting higher costs and political uncertainty impacting hiring in consumer-facing sectors.

Our analysis

The Independent (Holly Williams) reports unemployment at 5% and a 100,000 payroll fall in April, with vacancies down 28,000 to 705,000. The Guardian notes similar figures and highlights pay growth at 3.4% and energy-price uncertainty. Reuters and The Guardian provide corroboration on the payroll drop and regional impact. The Guardian (Heather Stewart) also emphasizes the Iran war’s effect on inflation and policy outlook. Reuters cites HMRC PAYE data showing a heavy April fall and the ONS vacancy decline.

Go deeper

• What does this mean for next month’s BoE decision?
• Are youth unemployment efforts at risk due to the dip in retail/hospitality hiring?
• Will energy prices keep inflation high enough to constrain wage growth?

More on these topics

• Office for National Statistics

  The Office for National Statistics is the executive office of the UK Statistics Authority, a non-ministerial department which reports directly to the UK Parliament.

• Iran - Country in the Middle East

  Iran, also called Persia, and officially the Islamic Republic of Iran, is a country in Western Asia. It is bordered to the northwest by Armenia and Azerbaijan, to the north by the Caspian Sea, to the northeast by Turkmenistan, to the east by Afghanistan a

• Pat McFadden - Member of Parliament of the United Kingdom

  Patrick Bosco McFadden is a British politician who has been Member of Parliament for Wolverhampton South East since 2005. A member of the Labour Party, he was briefly Shadow Secretary of State for Business, Innovation and Skills in 2010 and Shadow Ministe

• United Kingdom - Country in Europe

  The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom or Britain, is a sovereign country located off the north­western coast of the European mainland.

• Keir Starmer - Member of Parliament of the United Kingdom

  Sir Keir Rodney Starmer KCB QC MP is a British politician and former lawyer who has served as Leader of the Labour Party and Leader of the Opposition since 2020. He has been Member of Parliament for Holborn and St Pancras since 2015.

• Middle East - Region

  The Middle East is a transcontinental region that generally includes Western Asia, all of Egypt, Iran, and Turkey. Soviet Central Asia, Afghanistan, and Pakistan are generally excluded.

• Bank of England - Bank in London, England

  The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based.