Jobless rate surges by 200,000 under Labour due to company complaints about national insurance increase
The Labour government, in power since June 2024, is facing challenges in the UK labour market. Unemployment has seen a significant increase, with over 192,000 more people out of work since the government took office, pushing the unemployment rate to 4.7%, the highest outside pandemic years since 2016.
The employment rate has slightly increased to 75.3% in April to June 2025, but this has not been enough to offset the rise in unemployment. Vacancies, on the other hand, have been steadily falling for over three years. The latest quarter saw a sharp drop of 5.8%, with nationwide vacancies standing at 718,000.
Young workers aged 16-24 are particularly affected, with unemployment rising by 59,000 to 634,000. Despite this, their unemployment rate slightly decreased by 0.1% to 14.1% in the last quarter. Employment among young people has risen by 54,000 in the last quarter, with the employment rate up to 51.8%. Economic inactivity in young people has declined somewhat.
The decline in vacancies and increase in unemployment suggest that employers may be adopting more costly or cautious hiring practices. Feedback from surveys indicates that firms are reducing recruitment or not replacing staff who leave, creating a more challenging entry environment, especially for young workers.
In summary, unemployment has increased significantly since Labour came to power, with vacancies steadily falling. Young workers face higher absolute unemployment, though some rates suggest marginal quarterly improvement. Employers appear more reluctant or cost-conscious about hiring, contributing to falling vacancies and rising unemployment, particularly impacting young workers.
Other key points include a call for no more taxes on business in the forthcoming budget, markets seeing the chances of one more cut this year at little better than 50/50, and a skipped cut at the November meeting being a distinct possibility, according to economists. The chance of a September interest rate cut has faded further due to the latest fall in payroll numbers.
Payrolled employees fell by 8,000 in July, marking the tenth decline in the past 12 months. The jobless total increased by 206,000 since Labour came to power, with unemployment standing at 1.67 million in the three months to June 2022, the highest since the pandemic. The unemployment rate remains unchanged at 4.7% in the latest month.
The biggest fall in payrolled employees was among 25-34 year olds, down by 106,000 since July 2024. The falls in payrolled employees were concentrated in the hospitality and retail sector. Wage growth slowed from 5% to 4.6%, and the Bank of England's MPC is split over whether to cut interest rates further or guard against inflation pressures. No change to interest rates at the MPC's September meeting looks almost certain.
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