UK unemployment rises at fastest rate in almost five years

The number of people out of work in Britain rose at the fastest rate in almost five years, official figures showed on Wednesday, fuelled by an increase in unemployment among young people under the age of 24.

Following an almost two-year period of continuous declines in unemployment to the lowest levels since the mid 1970s, the number of people out of work rose by 46,000 to stand at 1.47 million in the three months to December, according to the Office for National Statistics. The jobless rate rose to 4.4% against City forecasts for the level to remain unchanged at 4.3%.

Despite the increase in unemployment, there was better news from a rise in the number of people in work. The size of the workforce continued to grow, rising by 88,000 to stand at 32.15m in the three months to December. This was driven by an increase in the numbers of people born in the UK while there was a drop in workers from eastern Europe.

The ONS said there was an increase in the number of full-time employees, and decrease in part-time and self-employed work. John Hawksworth, chief economist at PwC, said the reading on the labour market was positive because it showed more previously inactive people seeking work, some of them finding jobs and others still searching and so being classified as unemployed.

Average weekly earnings excluding bonuses increased by 2.5%, beating City forecasts for the rate of pay growth to stay unchanged at 2.4%. However, this remains below the rate of inflation, meaning workers are yet to see real wage growth. “The great pay squeeze continues. This is the 10th month in a row that real wages have fallen,” said TUC general secretary Frances O’Grady.

The signs of the job market losing steam will prove worrying for ministers, as well as the Bank of England as it looks to raise interest rates from as early as May. While the gradual upturn in pay will be encouraging, the rise in unemployment could add to worries over the health of the economy as the UK leaves the European Union.

John Philpott, director of the Jobs Economist, said the economic picture was perplexing because pay rose at a time when unemployment rose, which is unusual because pay rises tend to come when there are fewer people out of work. “It clearly adds to the conundrums facing economists, not least those at the Bank of England when they next consider if and when to raise interest rates,” he said.