The UK labour market is showing further signs of strain, with unemployment rising and job vacancies falling to their lowest level in five years.
The unemployment rate edged up to 5% in the three months to March, compared with 4.9% in the three months to February. At the same time, early estimates from the Office for National Statistics suggest vacancies fell by 28,000, or 3.9%, to 705,000 between February and April. That is the lowest level recorded since April 2021.
Analysts said the figures point to the early effects of the conflict in the Middle East on business confidence. They warned that demand for workers could weaken further if the situation continues, with firms already appearing to pause or slow recruitment.
The data also showed that wage growth had eased. Average regular pay rose by 3.4% in the first three months of the year and by just 0.3% after inflation was taken into account.
The combination of higher unemployment and slower wage growth could give the Bank of England more time to assess whether interest rates need to rise again to control inflation. Fresh inflation figures are due on Wednesday, with economists expecting a slight fall from the 3.3% recorded in the year to March.
The ONS has cautioned that unemployment figures remain affected by data-collection issues. However, the fall in vacancies and a drop in payroll employment suggest a similar weakening trend.
Separate Institute for Fiscal Studies research found youth employment has also fallen sharply, approaching declines seen during the financial crisis and the Covid pandemic.
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