Unemployment rate rises to 5.1% to hit ten-year high outside of Covid

The Office for National Statistics said the rate of unemployment is at its highest since early 2021

Britain’s unemployment rate rose to 5.1 per cent in the three months to October - the highest level for nearly five years, official data shows.

Outside of the Covid-impacted period, unemployment has not been at this level in the UK for almost a decade, since the first three months of 2016.

In addition, data showed wage growth slipping back further, though not quite as much as predicted, with young people in particular suffering amid a tough jobs market.

Britain’s unemployment rate hit a high of over four-and-a-half years and wage growth has slipped back (Alamy/PA)

The Office for National Statistics (ONS) confirmed the jobless rate rise, up from 5 per cent in the three months to September, while also noting average regular wage growth also pulled back again, to 4.6 per cent in the three months to October. This is down from an upwardly revised 4.7 per cent in the previous three months, and was 0.9 per cent higher after taking Consumer Prices Index (CPI) inflation into account.

Experts said the easing back in pay increases will reinforce the case for the Bank of England to cut interest rates when it decides on Thursday, as it helps ease policymakers’ fears over inflation.

The latest figures estimated the number of employees on payrolls plunged by 38,000 – the biggest fall for five years – during November to 30.3 million in further evidence of a weakened jobs market.

“[It’s] younger workers bearing the brunt of the slowdown in labour market activity as youth unemployment increased to 16 per cent. The prospects for a rebound in hiring activity for younger workers remain weak, particularly with the National Living Wage set to rise by 8.5 per cent from April 2026 for 18 to 21-year-olds,” explained KPMG UK chief economist, Yael Selfin.

The ONS said younger workers were struggling in the difficult hiring climate, with an 85,000 increase in those unemployed aged between 18 to 24 in the three months to October – the biggest rise since November 2022.

Responding to the ONS figures, secretary of state for Work and Pensions Pat McFadden said it “underlines the scale of the challenge we've inherited.”

“That is why we are investing £1.5bn to deliver 50,000 apprenticeships and 350,000 new workplace opportunities for young people - giving them real experience and a foot in the door.”

Liz McKeown, ONS director of economic statistics, said: “The overall picture continues to be of a weakening labour market.

“The number of employees on payroll has fallen again, reflecting subdued hiring activity, while firms told us there were fewer jobs in the latest period.

“This weakness is also reflected in an increase in the unemployment rate while vacancies remained broadly flat.

“The fall in payroll numbers and increase in unemployment has been seen particularly among some younger age groups.”

The ONS said that unemployment jumped by 47,000 for those aged between 25 and 34, while it was 28,000 higher for those aged 16 and 17.

Across the market, vacancies fell slightly, down 2,000 to 729,000 between September and November.

Martin Beck, chief economist at WPI Strategy, said: “The latest UK labour market data delivered a fresh set of worrying signals, suggesting that a long-running deterioration is still underway.

“With employment under pressure from a fragile economy and pay growth continuing to cool, the figures will provide another reason for the Bank of England’s Monetary Policy Committee to back an interest rate cut this week.”

He added that while there was no repeat of the blow to the jobs market from April’s rise in national insurance contributions (NICs), the recent autumn budget risked compounding troubles.

“Further policy pressures – notably another sizeable increase in the National Living Wage next April and new obligations on employers from employment rights legislation – risk adding strain at a point when the labour market can least afford it,” he said.

Jack Kennedy, senior economist at Indeed, added the data “cements the case for an interest rate cut”.

“Looking ahead, planned increases in the minimum wage and the expansion of workers’ rights are set to be further headwinds to labour demand in 2026, particularly in lower-paid sectors where job postings are already down 9 per cent year-on-year,” he said.

“Hospitality and retail, already disproportionately affected by last year’s rise in employer National Insurance contributions, have seen hiring capacity eroded. As these sectors traditionally provide key entry points for younger workers, the weakening outlook raises growing concerns about rising youth unemployment.”