Introduction: UK unemployment hits 5%, first time since 2021
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The weakening in Britain’s jobs market has gathered pace, with new data showing the jobless rate has hit its highest level since the Covid-19 pandemic.
The UK unemployment rate has jumped to 5% in the July to September quarter, the highest level since February 2021. That’s up from 4.8% a month earlier, and higher than expected.
In another blow, the Office for National Statistics estimate that the number of employees on payrolls fell by 32,000 in September, and by another 32,000 in October to 30.3 million.
And with the jobs market cooling, wage growth slowed too. Annual growth in employees’ average earnings slipped to 4.6% in the quarter, down from 4.7% in the three months to August.
ONS director of economic statistics Liz McKeown says:
“Taken together these figures point to a weakening labour market. The number of people on payroll is falling, with revised tax data now showing falls in most of the last 12 months. Meanwhile the unemployment rate is up in the latest quarter to a post pandemic high. The number of job vacancies, however, remains broadly unchanged.
“Wage growth in the private sector slowed further, but we continue to see stronger public sector pay growth, reflecting some pay rises being awarded earlier than they were last year.”
This jump in unemployment, and slowing wages, will heighten concerns that the economy is cooling – as Rachel Reeves prepares her budget due on 26 November – and could spur the Bank of England to cut interest rates again as soon as December.
The agenda
7am GMT: UK labour market report.
8am GMT: UK grocery inflation report
10am GMT: ZEW eurozone economic confidence index
11am GMT: US NFIB Business Optimism Index
2.30pm GMT: Business Secretary Peter Kyle makes first appearance at Business and Trade committee
Updated at 02.16 EST
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The business tax rises announced in last year’s budget, and uncertainty over what the chancellor will announce this time, are being blamed for the rise in UK unemployment.
Isaac Stell, investment manager at tax advisory service Wealth Club, calls it a “self-inflicted wound”:
There can be no doubt that the fiscal levers pulled by the Government and the Chancellor have significantly contributed to these figures and the responsibility lies at their feet.
With speculation around the Budget reaching fever pitch, businesses have postponed hiring and are less likely to commit to any form of investment until they know where the economic land lies. The stakes couldn’t be higher for the government and with further tax rises guaranteed at the budget, the fiscal landscape for employers and employees looks to be on ever shakier ground.”
Ashley Webb, UK economist at Capital Economics, also blames the rise in employer national insurance contributions for workforce cuts:
The 32,000 fall in payroll employment in October was the eleventh monthly decline over the past year and suggests that businesses continued to trim headcounts after the Chancellor announced the rises in payroll taxes and the minimum wage in last year’s October Budget.
Admittedly, the number of job vacancies paused its recent downward trend and remained broadly unchanged at 723,000 in the three months to Octobe
ShareReal wage growth slows too
Inflation is taking a large chunk out of UK pay growth.
While regular pay growth was 4.6% in July to September, that falls to just 0.8% in real terms once you adjust for CPI inflation.
That’s down from 0.9% in the previous three-months.
It was last lower than 0.8% in June to August 2023, when it was 0.7%.
SharePublic sector pay outpaces private sector
Wage growth in the public sector was much more rapid than in the private sector over the summer, today’s jobs report shows.
Annual average regular earnings growth was 6.6% for the public sector in July to September, compared with 4.2% for the private sector.
The ONS cautions that the public sector annual growth rate is affected by some public sector pay rises being paid earlier in 2025 than in 2024, which caused a base effect.
Reminder: overall regular pay growth slowed to 4.6%, which is the lowest since February to April 2022.
A chart showing UK wage growth Illustration: ONSShare
This morning’s labour market report shows a jump in unemployment among men in the last couple of months.
While the overall jobless rate has risen to 5% in July-September, up from 4.7% in April-June, there’s a clear gender split. Among men, joblessness is up from 4.8% to 5.4%, while among women it’s unchanged at 4.5%.
A chart showing UK unemployment rates Photograph: ONS
The ONS says:
In the latest quarter (July to September 2025), those unemployed for up to 6 months or over 12 months increased but the number of those unemployed between 6 and 12 months decreased.
The number of people unemployed for up to 6 months, between 6 and 12 months, and over 12 months, increased over the year, since July to September 2024.
The increase in the number of people unemployed in the latest quarter was the result of an increase in the number of unemployed men. We will explore this further as more data becomes available.
ShareSterling drops after UK jobs report
The pound has dropped by half a cent against the US dollar, as traders react to the jump in UK unemployment, and the slowdown in wage growth.
This has pushed sterling down to $1.3123, and indicates the City may expect the Bank of England to respond by lowering interest rates.
Last week, the Bank narrowly voted to leave borrowing costs unchanged, by fivevotes to four.
Updated at 02.16 EST
Introduction: UK unemployment hits 5%, first time since 2021
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The weakening in Britain’s jobs market has gathered pace, with new data showing the jobless rate has hit its highest level since the Covid-19 pandemic.
The UK unemployment rate has jumped to 5% in the July to September quarter, the highest level since February 2021. That’s up from 4.8% a month earlier, and higher than expected.
In another blow, the Office for National Statistics estimate that the number of employees on payrolls fell by 32,000 in September, and by another 32,000 in October to 30.3 million.
And with the jobs market cooling, wage growth slowed too. Annual growth in employees’ average earnings slipped to 4.6% in the quarter, down from 4.7% in the three months to August.
ONS director of economic statistics Liz McKeown says:
“Taken together these figures point to a weakening labour market. The number of people on payroll is falling, with revised tax data now showing falls in most of the last 12 months. Meanwhile the unemployment rate is up in the latest quarter to a post pandemic high. The number of job vacancies, however, remains broadly unchanged.
“Wage growth in the private sector slowed further, but we continue to see stronger public sector pay growth, reflecting some pay rises being awarded earlier than they were last year.”
This jump in unemployment, and slowing wages, will heighten concerns that the economy is cooling – as Rachel Reeves prepares her budget due on 26 November – and could spur the Bank of England to cut interest rates again as soon as December.
The agenda
7am GMT: UK labour market report.
8am GMT: UK grocery inflation report
10am GMT: ZEW eurozone economic confidence index
11am GMT: US NFIB Business Optimism Index
2.30pm GMT: Business Secretary Peter Kyle makes first appearance at Business and Trade committee
Updated at 02.16 EST