UK Unemployment Rate Falls Unexpectedly to 4.9% as Inactivity Rises

Britain’s unemployment rate fell unexpectedly to 4.9% in the three months to February, down from 5.2% in the three months to January, according to official figures cited by the BBC and Sky News.

The Office for National Statistics (ONS) said the decline was partly driven by a rise in people not actively seeking work, with Liz McKeown, director of economic statistics at the ONS, saying: "Alongside falling unemployment, the number of people not actively seeking work increased, with data suggesting fewer students seeking work alongside their studies."

BBC

The BBC also reported that the inactivity rate was 21% in the December to February period, up from 20.7%.

Sky News said the ONS reported a drop in jobless rate to 4.9% and that early data from HM Revenue & Customs showed a drop of 11,000 during March, the first month of the US-Iran war that saw global energy prices rise sharply.

The BBC added that wages rose at an annual pace of 3.6% between December and February, described as the weakest rate since late 2020, while pay is still rising faster than inflation.

In parallel, EDP24 reported that vacancies plunged by 29,000 in the three months to 711,000, which it said was the lowest level since April 2021.

The ONS figures described a mixed labour market picture in which unemployment fell while other indicators pointed to weaker hiring and slowing pay growth.

The BBC said wages rose at an annual pace of 3.6% between December and February, while Sky News reported average annual earnings growth excluding bonuses fell to 3.6% from 3.8%.

BBC

Sky News also said vacancies fell to their lowest level in almost five years, and it quoted the ONS director of economic statistics, Liz McKeown, saying: "Vacancies fell to their lowest level in almost five years, but with unemployment also falling the number of vacancies per unemployed person remains broadly unchanged."

EDP24 reported that regular wage growth dropped further to 3.6% in the three months to February from 3.8% in the previous three months, and it said the earnings outstripped inflation by 0.4% with the Consumer Prices Index (CPI) taken into account.

The Times said pay growth fell to its lowest level since the end of 2020, with regular pay rising by 3.6% on an annual basis in the three months through February, and it added that including bonuses wages increased by 3.8%, down from 4.1%.

The Guardian reported that excluding bonuses, wage growth fell to 3.6% year on year in the three months to February, down from 3.8% in January, and it said including bonuses wages increased by 3.8%, slowing from a rise of 4.1% in the previous quarter.

Multiple reports tied the labour market data to the timing of the US-Israeli war with Iran and the resulting rise in energy prices, while also emphasizing that the unemployment data covered a period before the conflict’s impact.

“- Published The UK's unemployment rate has fallen unexpectedly, partly due to fewer students looking for work while they study”

BBC

The BBC said most of the data released by the ONS was gathered before the outbreak of the US-Israeli war with Iran, which has led to a surge in energy prices, and it noted that if these energy prices remain high, economists have warned this could affect the jobs market in coming months.

The BBC added that the ONS said early estimates suggested the number of workers in payrolled employment slipped by 11,000 in March, the first month of the Iran war.

Sky News similarly said the ONS reported a drop of 11,000 during March, the first month of the US-Iran war that saw global energy prices rise sharply.

The Guardian reported that the Iran war began on 28 February, meaning the jobs data does not reflect how employers have responded to rising energy costs, and it pointed to more up-to-date tax figures showing employees on payrolls fell by 11,000 in March to 30.3 million.

The Times said the ONS’s unemployment data covered the period before the start of the US-Israeli war with Iran eight weeks ago, and it described economists predicting unemployment could rise as consumers and businesses cut spending to deal with higher energy prices.

Economists and political figures interpreted the same unemployment drop in different ways, with some focusing on the statistical drivers and others on what the data implies for future job losses.

James Smith at ING said the fall in unemployment did not "appear to be because of a big shift into work" and that "The details reveal the drop in the jobless rate is pretty much solely down to a rise in 'economic inactivity'."

EDP24

Yael Selfin at KPMG UK told the BBC that the labour market showed "signs of stabilising in February, but a reversal may be on the horizon" and added that unemployment is likely to trend higher as firms scale back hiring.

The Guardian quoted Pat McFadden, work and pensions secretary, saying: "These figures show that there was an improvement in the labour market at the beginning of the year with unemployment falling below 5%, and 332,000 more people in work than a year ago."

In contrast, the Spectator framed the unemployment fall as "Unemployment has fallen – but not in a good way" and argued that being classified as unemployed requires being "actively seeking work."

EDP24 reported Shadow work and pensions secretary Helen Whately saying: "Labour’s taxes and red tape have killed opportunity for many thousands of people."

The labour market figures fed directly into expectations for Bank of England policy and into government plans for energy costs and workforce support, with multiple outlets citing specific forecasts and measures.

“The UK unemployment rate has fallen unexpectedly to its lowest level since last summer as inactivity in the jobs market increases and vacancies tumble, according to official figures”

EDP24

The BBC reported that economists have warned high energy prices could affect the jobs market in coming months, and it said the IMF predicted the energy shock from the conflict would hit the UK the hardest of the world’s advanced economies, cutting its estimate for UK growth this year to 0.8% from 1.3%.

GB News

Sky News said recent forecasts suggested the UK economy faces the biggest hit among developed nations due to the fossil fuel price crisis caused by the conflict in the Middle East, and it cited an Item Club study forecasting the jobless rate hitting 5.8% in just over a year’s time, affecting almost 250,000 people.

In the same reporting, Work and Pensions Secretary Pat McFadden said: "We will do everything we can to support the country through this period, including by slashing energy bills by up to 25% for 10,000 manufacturers."

The Guardian said policymakers at the Bank would examine Tuesday’s employment market data and the inflation figures before making their next interest rate decision on 30 April, and it said economists expect it to keep the base rate on hold at 3.75%.

The Guardian also quoted Ashley Webb at Capital Economics saying the fall in unemployment suggests the labour market was starting to stabilise before the Iran war, but that "the more timely figures imply that won’t last," and it cited the EY Item Club forecast that unemployment will hit 5.8% by the middle of 2027 with almost 250,000 more people losing their jobs.