UK Unemployment Rate Increases to 4.3%
The Office for National Statistics (ONS) has reported a rise in the UK unemployment rate to 4.3% in the latest quarter, marking an increase of 0.3%. This uptick comes as the pace of wage growth continues to slow, with annual pay growth for the period from July to September slowing to just 4.8%—the lowest in over two years. While this pay growth is still outpacing inflation, it signals a marked deceleration in the labour market.

Job Vacancies Continue to Decline
Job vacancies across the UK also fell during the same period, continuing a two-year trend of slowing hiring. However, the level of vacancies remains above pre-pandemic levels, reflecting a shift in the job market. Liz McKeown of the ONS, speaking to the BBC, stated that the data illustrates a "continued easing of the labour market".

Impact of Budget and Rising Costs on Job Market
The decline in job vacancies and slower wage growth aligns with growing concerns among businesses about the impact of higher costs and increased National Insurance Contributions (NICs). With the UK National Minimum Wage set to rise to £12.21 per hour in April 2024, many employers have signalled that these increased costs—along with other budgetary changes—could slow hiring and potentially lead to higher prices, which may further fuel inflation.

Many businesses have expressed worries that the budget may reduce new job creation, freeze wage increases, or even result in higher consumer prices, which could push inflation back up. In the public sector, wage increases planned for the coming year may be offset by financial strain in the private sector. Alexandra Hall-Chen from the Institute of Directors also raised concerns about the Employment Rights Bill, suggesting that additional regulatory measures could hinder job creation and exacerbate economic challenges.

Concerns About ONS Data Reliability
Despite the findings, there are growing concerns about the accuracy and reliability of the ONS unemployment data. The ONS itself has acknowledged that the number of survey respondents in the past year has decreased, potentially affecting the data's precision. This data is crucial, as it directly influences decisions made by the Bank of England (BoE), especially in relation to interest rate policy.

Last week, the Bank of England cut interest rates for the second consecutive time after inflation fell below its target, reaching 1.7%. However, economists argue that the latest unemployment figures are unlikely to influence another rate cut in December. Liz McKeown of the ONS has acknowledged the shortcomings in data collection and assured the public that efforts are underway to improve the reliability of future reports.

Economic Forecasts and Long-Term Trends
A separate survey from the Recruitment and Employment Confederation (REC) and consultancy KPMG echoed the ONS findings, showing a continued decline in job vacancies over the past year. Economist Rob Wood of Pantheon Macroeconomics commented that unemployment is expected to rise gradually, while wage growth is slowing, but still too high to achieve sustainable inflation targets. Wood emphasized that the Bank of England is likely to focus on overarching economic trends, rather than any short-term fluctuations in the data.

Conclusion: Labour Market Challenges Ahead
As the UK job market continues to show signs of strain, the combination of slower wage growth, rising costs for employers, and declining job vacancies paints a challenging picture for the coming months. Policymakers, businesses, and economists will need to carefully monitor these trends to navigate potential risks, including the impact on inflation, employment opportunities, and overall economic stability.

Key Takeaways:

• UK unemployment rate rises to 4.3%, up 0.3% from the previous quarter.
• Wage growth slows to 4.8%, the lowest rate in over two years.
• Job vacancies decline, although still above pre-pandemic levels.
• National Insurance Contributions and the minimum wage increase could affect hiring and inflation.
• ONS acknowledges concerns about the accuracy of its data collection.
• Economists predict gradual unemployment increase and slower wage growth.