UK unemployment rate drops to 4.9%
The UK unemployment rate fell unexpectedly to 4.9% in the three months to February, while wage growth slowed to its weakest pace in more than five years, according to data from the Office for National Statistics, the BBC reported.This decrease came despite expectations that the rate would remain at 5.2%. However, the numbers also show a rise in economic inactivity, meaning more people are not actively looking for work and are therefore excluded from unemployment calculations.Annual wage growth was 3.6% between December and February, the lowest level since late 2020, although earnings are still rising faster than inflation.Liz McKeown, director of economic statistics at the Office for National Statistics, said: “Alongside the decline in unemployment, the number of people not actively looking for work has increased, with data indicating fewer students looking for work alongside their studies,” the BBC reported.There are also signs of decline in the labor market. Paid jobs fell by 11,000 in March, while job openings fell to 711,000 between January and March, the lowest level in almost five years.Most of this data predates the US-Israeli conflict with Iran, which led to a rise in global energy prices. Economists warn that continued high costs could impact employment in the coming months.Yael Selvin, chief economist at KPMG in the UK, told the BBC that the labor market showed “signs of stabilization in February, but there may be a reversal on the horizon.”
She added: “The decline in the unemployment rate is consistent with survey evidence that hiring activity was rebounding before the conflict in the Middle East. However, unemployment is likely to trend higher in the coming months as companies reduce hiring in response to rising costs and weak demand.”The International Monetary Fund warned that an energy shock could hit the UK harder than other advanced economies, and cut its growth forecast for this year to 0.8% from a previous estimate of 1.3%.As a net energy importer, the UK remains particularly vulnerable to sharp price increases.Separate official data showed that the economy grew by 0.5% in February, suggesting that momentum was building before the latest geopolitical tensions began.