Yael Selfin, chief economist at KPMG UK, said the UK’s labour market “showed signs of stabilising in February, but a reversal may be on the horizon”.
She added the fall in the unemployment rate was “consistent with survey evidence suggesting hiring activity was recovering before the conflict in the Middle-East”.
“However, unemployment is likely to trend higher in the coming months as firms scale back on hiring in response to rising costs and weaker demand.”
Luke Bartholomew, deputy chief economist at Aberdeen, said while the sharp drop in the unemployment rate was “eye catching”, it largely reflected “rising inactivity rather than stronger hiring”.
“Meanwhile, with cash wages continuing to moderate and inflation set to increase sharply in the coming months, it is likely households are about to experience another period of negative real wage growth, which will weigh further on growth.”
Last week, the International Monetary Fund (IMF) predicted that the energy shock from the conflict would hit the UK the hardest of the world’s advanced economies.
As a result, the IMF cut its estimate for UK growth this year to 0.8%, from the 1.3% prediction made in January before hostilities began.
Forecasters have noted that as the UK is a net importer of energy, it is particularly sensitive to rapid rises in energy prices.
Official data released last week showed the UK’s economy grew by a faster-than-expected 0.5% in February, indicating growth had been picking up ahead of the conflict.