By Staff, Agencies

UK unemployment has hit a four-year high, new data from the Office for National Statistics [ONS] reveals, signaling a growing jobs market slowdown just weeks before Chancellor Rachel Reeves' autumn budget.

The headline UK unemployment rate climbed to 5.0% in the three months to the end of September, up from 4.8% in the previous quarter. The increase brings the total number of unemployed people to 1.8 million, the highest since January 2021 at the height of the Covid pandemic.

Suren Thiru, economics director at the Institute of Chartered Accountants, said the figures reflect a labor market shaken by “pre-budget jitters,” with businesses, already struggling from April’s national insurance hike, now reducing recruitment in anticipation of another tough budget.

The data could increase pressure on the Bank of England to cut interest rates, possibly as soon as next month. While the Bank kept rates unchanged last week, it hinted at a possible rate cut in December amid signs that inflation has peaked.

The Bank has forecast that unemployment could rise further above 5% in 2025. A cooling labor market may ease inflationary pressures, making it harder for workers to demand higher wages and for businesses to raise prices.

Job market data comes ahead of Chancellor Reeves' November 26 budget, where tax hikes are expected to tackle a £30bn shortfall. Business groups warn higher taxes on employers could worsen the employment crisis.

Reeves’ past hikes in employer national insurance and the national living wage have led to job cuts, particularly in sectors like hospitality, leisure, and retail. HMRC data shows 180,000 fewer payrolled employees over the past year, with a 32,000 drop in October alone.

ONS data revealed that job vacancies remained largely unchanged from August to October but were down 99,000 compared to last year. The biggest drops were in wholesale and retail, accommodation and food services, and IT—sectors hit hard by rising business costs and weak consumer demand.

Pressure is rising on Threadneedle Street to cut interest rates as job market strains continue. Annual wage growth also dropped to 4.8, below expectations.

In response to the figures, Work and Pensions Secretary Pat McFadden highlighted that over 329,000 people have found work this year. He emphasized that the government is intensifying efforts to boost employment, saying, “But today’s figures are exactly why we’re stepping up our plan to get Britain working."

McFadden highlighted new initiatives, including modernized job centers, expanded youth hubs, and partnerships with employers to address ill-health in the workforce.