According to official figures, the UK's unemployment rate has surged to its highest level since September 2021, reaching 4.4% in the three months to April.

Despite this rise, wage growth remains strong, with regular earnings increasing at an annual pace of 6%, unchanged from the previous month. Pay increased by 2.9% annually when adjusted for inflation, the highest since August 2021.

The inactivity rate, indicating the percentage of working-age people not actively seeking work, also increased, reaching its highest level in nearly a decade at 22.3%. This equates to over nine million people. Long-term sickness has become the primary reason for economic inactivity since 2022.

The rise in wages is partly attributed to the April increase in the National Living Wage, which went up by 9.8% to £11.44 per hour for those aged 21 and over. However, concerns persist over worker shortages impacting the UK economy. This was evidenced by the drop in employer payroll numbers by 36,000 between March and April, with a continued decline in May. Additionally, job vacancies fell by 9,000 to 904,000.

The Office for National Statistics (ONS) has urged caution regarding the unemployment figures due to a small survey sample, though recent employer payroll data supports these findings. The Bank of England will closely examine this data to inform the timing of its first interest rate cut since the pandemic.

Talk to us about your finances.