Unemployment hits five-year high after surprise rise as wage growth slows – ONS

Unemployment has unexpectedly risen to its highest level for five years and wage growth has slowed again as the UK jobs market continues to come under pressure, according to official figures.

The Office for National Statistics (ONS) said the rate of unemployment lifted to 5.2% in the three months to December, up from 5.1% in the three months to November.

This was the highest since the three months to January 2021 and the highest for more than a decade outside the pandemic era.

Most economists had expected unemployment to remain at 5.1% in the latest quarter.

The ONS added that regular wage growth fell back once again to is lowest level for almost four years, to 4.2% in the three months to December, against a downwardly revised 4.4% in the three months to November, though it was 0.8% higher after taking Consumer Prices Index inflation into account.

But there was another welcome increase in vacancies, up by 2,000 quarter-on-quarter to 726,000 in the three months to January, which is the second rise in a row.

Liz McKeown, ONS director of economic statistics, said the data showed “weak hiring activity” and that “more people who were out of work are now actively looking for a job”.

She added: “The number of vacancies has remained broadly stable since the middle of last year.

“Alongside rising unemployment this means that the number of unemployed people per vacancy has increased, reaching a new post-pandemic high.”

The ONS said redundancies increased by 11,000 to 145,000 in the final quarter of 2025.

The data also showed the number of workers on payrolls fell by 6,000 in the three months to December and is estimated to have dropped by 11,000 in January to 30.3 million, although the figures are subject to revision.

It comes after recent growth figures showed the economy recorded meagre growth of 0.1% in the final three months of last year amid budget uncertainty and a lacklustre performance in December.

The jobs market has weakened, with sectors such as retail and hospitality coming under particular strain after the Government hiked national insurance contributions and pushed through above-inflation increases in the minimum wage, with some companies cutting jobs and slowing hiring in response.

The Conservatives said the latest rise in the jobless rate was “the predictable result of bad decisions and economic incompetence” by the Labour government.

Shadow work and pensions secretary Helen Whately said: “Young people are taking the hardest hit.

“Entry-level roles are the first to disappear from Labour’s tax hikes.

“By making hiring more expensive and more risky, Labour are ensuring school leavers and graduates never even get a foot in the door.”

Work and Pensions Secretary Pat McFadden said: “Today’s figures show there are 381,000 more people in work since the start of 2025, but we know there is more to do to get people into jobs.

“Our £1.5 billion drive to tackle youth unemployment is a key priority.”

Experts said the data will reinforce expectations for the Bank of England to cut interest rates again next month.

An expected drop in inflation in data due on Wednesday is set to add to the argument for a rates reduction.

Thomas Pugh, chief economist at RSM UK, said: “December’s rising unemployment rate, slowing private wage growth and falling payroll numbers in January all point towards a rate cut in March.

“A soft inflation number tomorrow is all it will take to seal the deal.”