UK unemployment rate rises to 5% as jobs market weakens
UK Unemployment Rises to 5% in Three Months to September
According to recent official estimates, the rate of unemployment in the United Kingdom has risen to 5% in the three months to September, suggesting that the job market has weakened. The Office for National Statistics (ONS) stated this is the highest rate since the period from December 2020 to February 2021.
The rise in unemployment was higher than anticipated. Average wage growth in the third quarter was 4.6%, down from 4.7% over the three months to August.
"These results point to a weaker job market," said Liz McKeown, ONS Director of Economic Statistics.
đïž Data Quality and Bank of England Outlook
While the unemployment rate is at a post-pandemic high, an ONS spokesperson noted that the number of open job positions remains relatively unchanged.
The ONS has reported that its unemployment data should be treated with caution and that it is "taking further steps to address questions regarding the quality of the reports."
The Bank of England expects the unemployment rate to remain at 5% for the next five years. The Monetary Policy Committee is scheduled to meet again on 18 December to discuss a rate cut, with some analysts predicting that Tuesday's unemployment figures will pave the way for this to proceed.
Danni Hewson, head of financial analysis at AJ Bell, commented that while hopes for a cut have "increased sharply," no one is "taking anything for granted" until "we see all of the Chancellor's workings in black and white."
đŒ Political and Market Reactions
Pat McFadden, Labour's Work and Pensions Secretary, acknowledged "challenges in the labour market" but maintained that the "British economy is also producing jobs." He expressed concern over the "increase in the number of young people not employed or educated over the past five years."
Helen Whately, the Conservative Shadow Work and Pensions Minister, countered that the government's plans were "driving hope out of Britain." She claimed thousands of families were "without the certainty of a regular paycheck" due to the Chancellor's "poor choices" of "increasing taxes on employees, piling red tape on companies, and damaging morale in the economy."
Payroll and Vacancy Data
An early estimate indicated that the number of people on company payrolls fell by 180,000 (0.6%) in the year to October, a larger decrease than forecast.
However, ONS estimates showed that the number of job vacancies between August and October 2025 increased marginally by 2,000 to 723,000. This marks the first increase in more than three years, following a steady decrease from the peak of 1.3 million in the period from March to May 2022.
đ« Hiring Plans 'Shelved'
The ONS data shows nearly 1.7 million people are now receiving unemployment benefits, a slight decrease from a year ago.
The results also show a difference between public and private sector wage growth. Public sector pay rose by 6.2%, compared to 4.4% in the private sector. Yael Selfin, chief economist at KPMG UK, said public sector pay growth was "approaching a peak," as large wage increases from last year were not expected to persist due to government budget constraints. She added that private sector pay growth was "anticipated to decline even more" as "more people in the labour market looking for work" weakens "employees' bargaining skills."
With the Budget two weeks away, Richard Carter, head of fixed interest research at Quilter Cheviot, said many companies "will have scrapped any major recruiting efforts."
"They will almost certainly be hesitant to make any concrete commitments until they know how much more money is going to be spent," he said.
Tina McKenzie, policy chair for the Federation of Small Businesses, said the increase in unemployment reflects the government's "complacent attitude to jobs and businesses." She stated that small businesses had been "barred from recruiting employees" by "ever-increasing regulation, litigation, and taxes," and urged Chancellor Rachel Reeves to "take action that protects jobs and growth."
