Unemployment rate rises to 3.9 per cent in January

The Office for National Statistics (ONS) said average regular pay growth, excluding bonuses, fell to 6.1 per cent in the quarter to January, down from 6.2 per cent in the three months to December and marking the slowest growth for more than a year.

When taking Consumer Prices Index (CPI) inflation into account, real regular wages rose by 2 per cent, which is the highest since the summer of 2019, excluding the pandemic-skewed years.

The ONS said the UK rate of unemployment lifted unexpectedly to 3.9% in the three months to January from 3.8 per cent in the previous three months while vacancies fell by 43,000 quarter on quarter in the three months to February to 908,000 – the 20th drop in a row.

Most economists had expected the jobless rate to remain at 3.8 per cent and for wage growth to remain at 6.2 per cent.

It comes after official data last month confirmed the UK fell into recession at the end of last year after output fell for two quarters in a row.

Data on Wednesday will show how the economy fared in January amid expectations the recession will prove short-lived.

But experts said the unemployment data confirmed a weakening jobs market.

The ONS cautioned the data should still be “treated with additional caution” as it continues to overhaul its labour force survey due to low response rates, with the full revamped version not due to be introduced until September.

Liz McKeown, ONS director of economic statistics, said: “Recent trends in the jobs market are continuing, with earnings, in cash terms, growing more slowly than recently but, thanks to lower inflation, real-terms pay continues to increase.

“The number of job vacancies has also been falling for coming up to two years, though the total remains more than 100,000 above its pre-pandemic level.”

The figures also revealed more than a fifth of adults in the UK – 9.25 million – are not actively looking for work, with the so-called inactivity rate increasing year on year to 21.8%.

More timely data estimated that the number of workers on payrolls rose by 20,000 between January and February to 30.4 million, although this is subject to revision.

The West Midlands claimant count covering those claiming unemployment benefits, including Universal Credit, was up 4,675 to 184,500 (5 per cent of the working population) last month.

In Shropshire, there was a rise of 120 to 4,405 (2.3 per cent) with Telford & Wrekin at 4,190 (3.6 per cent), from 4,095 the month before. In Powys, the number was 1,720, up from 1,690.

Compared to the previous year, Shropshire's claimant count figures were a reduction of 160 but Telford saw an increase of 195 for the same period. There was a reduction in the number of claimants in the 50 plus age groups across the region.

Louise Johnson, Partnership Manager Shropshire, Telford & Wrekin, Department for Work and Pensions, Work and Health Services, said: "Next month through our work psychologists we are launching the ‘Enhancing Confidence for Work’ group session.

"These are sessions for claimants who lack confidence about being able to move towards or into work, or to participate in some work-related activity. The sessions will be helpful in increasing their self-belief and confidence in relation to employment.

"Shropshire and Telford Jobcentres have continued to focus on supporting their 50 plus aged claimants delivering group information sessions to assist with Pension planning, support for jobseekers with health issues and adapting their CV’s for applications..

"We recently held an event at Bridgnorth Library with support from Silverpreneurs, Christians Against Poverty, Make Sport Work and Access to Work. Customers have found the information both helpful and informative."

Walsall claimant count figures were up 9705 (5.6 per cent of the working population) from 9,595 while Sandwell als saw a rise to 13,475 (6.2 per cent) from 13,310.

Wolverhampton stood at 12,090 (7.3 per cent), up from 11,840, while Dudley was 9,210 (4.7 per cent), up from 9,050.

Staffordshire's figure was 15,910 – 3 per cent of the working population – and up from 15,290.

Cannock chase rose to 2,160 from 2,130 while Lichfield was 1,555 (2.5 per cent) up from 1,435.

Stafford as 2,135 (2.6 per cent), up from 2,045 while South Staffordshire's total was 1,710 (2.6 per cent) and Tamworth was 1,745.

Wyre Forest, including Kidderminster was 1,900, compared to 1,870 the previous month.

Paul Butterworth, CEO at Chambers Wales South East, South West and Mid, said: “The latest labour market data reveals a mixed bag of news; vacancies continue to fall and there is minimal movement in the rates of employment and unemployment yet there remains high levels of economic inactivity whilst wages continue to outpace inflation.

“The labour market continues to be tight and challenging for businesses in Wales who are trying to recruit the right skilled staff. Almost two thirds of businesses in Wales experienced difficulties in recruiting suitably skilled staff as demonstrated in Q4 of 2023 according to our Quarterly Economic Survey.

“While the government at UK level took steps to address this in last week’s Budget with regards to childcare access, there is still more to be done to help people back into work and to progress such as ensuring fair and flexible workplaces with access to training and upskilling opportunities.

“Both Welsh Labour leadership candidates have expressed that they want to make Wales a desirable place to work, highlighting plans to support fair workplaces and opportunities for skills development which may help address and overcome some of the current barriers to work. We need to see this put into plan.”

The Recruitment and Employment Confederation (REC) Chief Executive Neil Carberry said: “Today’s numbers are marginally weaker than expectations as the jobs market waits on growth to return.

"Recruiters report that firms are still ready to move but are taking longer to make decisions about investment and hiring in the face of economic uncertainty.

"This explains the relatively slow rate of decline, a picture which contrasts with business surveys that show high levels of optimism for later in the year.

"The Bank of England beginning to cut the base rate would deliver a shot of confidence to businesses and support a likely bounce back in growth this summer.

“Pay growth is weakening at a steady rate, which is likely to fall further when the April 2023 pay awards fall out of the calculation. There is little risk of pay driving inflation to stay higher at this point.”

Chancellor Jeremy Hunt insisted the Government’s “plan is working”.

He said: “Even with inflation falling, real wages have risen for the seventh month in a row.

“Take-home pay is set for another boost thanks to our cuts to national insurance which, in total, are putting over £900 a year back into the average earner’s pocket.”

The figures show there were 203,000 working days lost because of labour disputes across the UK in January, with the health and social work industry impacted the most.

Economists said the further easing back of UK wage growth reinforces expectations that the Bank of England will look to cut interest rates.

The Bank has been keeping a close eye on wage data in particular in its bid to bring high inflation back to target.

However, the national living wage will rise from £10.42 an hour to £11.44 from April, benefiting nearly three million people, which may boost consumer spending but also hamper progress on bringing inflation back to the Bank of England’s 2% goal.

Rob Wood, of Pantheon Macroeconomics, said: “We don’t think the surprises are large enough to cause a major change in the Bank’s Monetary Policy Committee (MPC) guidance at their meeting next week, but the data will give the MPC a little extra confidence that they can cut rates in the summer.

“We expect the first Bank rate cut in June and today’s data reduce the risks of that cut being delayed until August a little.”