UK unemployment rises to 4.3% after Reeves’ first Budget

The rate of unemployment in the UK rose in the three months to September, according to the Office for National Statistics (ONS).

Over this period, the proportion of unemployed adults rose to 4.3 per cent, up from 4 per cent in the previous period.

At the same time, the number of vacancies decreased by 35,000 to 831,000 – the 28th consecutive period in which vacancies fell.

The number of people claiming unemployment-related benefits also increased between September and October, with 1.8 million more people in this category.

The data shows that the number of payrolled employees decreased by 9,000 between August and September but that the number in employment was 136,000 when compared with September 2023.

The average earnings of Britons also fell by 4.8 per cent in the three months to September, according to the Office for National Statistics (ONS).

However, once the Consumer Prices Index (CPI) of inflation is taken into account, average earnings were 2.7 per cent higher.

Work and Pensions Secretary Liz Kendall also highlighted on Tuesday that figures showed “2.8 million people – a near record number are locked out of work due to poor health”.

“That’s why our Get Britain Working plan will bring forward the biggest reforms to employment support in a generation, backed by an additional £240m of investment,” she said.

“And while it’s encouraging to see real pay growth this month, more needs to be done to improve living standards too. So, from April next year over three million of the lowest paid workers will benefit from our increase to the National Living Wage, delivering a £1,400 a year pay rise for a full-time worker.”

While the majority of these figures predate Chancellor Rachel Reeves’ first Budget, the underline many of the challenges facing the Government when it comes to work.

Labour has faced criticisms over its plans to increase the employer rate of national insurance, which many businesses have warned could force them to cut wages or staff.

In her Budget, the Chancellor acknowledged that her plans could affect wage growth for private-sector workers, or companies will have to absorb costs.

Businesses will also have to account for an increase to the minimum wage from £11.44 to £12.21.

The Office for Budget Responsibility (OBR) forecasts that by 2026-27, some 76 per cent of the total cost of the NICs increase is passed on through lower real wages. It could also lead to the equivalent of around 50,000 average-hour jobs being lost.

Monica George Michail, associate economist at the National Institute of Economic and Social Research (NIESR), said today’s figures showed that “regular wage growth continues to ease”.

She added: “With vacancies falling, we forecast wage pressures to ease in the coming months, although the announced rise in National Living Wage would exert some upward pressure in April.”

Novo Constare, CEO temp work agency Indeed Flex, said the latest statistics showed there were “concerns about upcoming tax increases in the Autumn budget” over the period.

“While the Bank of England’s August base rate cut provided a boost for businesses and consumers, it wasn’t enough to push companies to move forward with expansion plans. As a result, unemployment saw a slight uptick while job vacancies also decreased,” he continued.

Constare added that stable inflation rates and planned interest rate cuts were good news, but “concerns around the budget seemed to overshadow these positive factors”.