UK unemployment set to hit 5%: think tank
The UK’s unemployment rate is set to hit the highest level since the beginning of 2021 and the Covid pandemic, new data by think tank The Resolution Foundation shows.
The group’s data shows that unemployment has not yet peaked, and may have continued to tick up in June and July to around 5%.
The number of payrolled employees in the UK has fallen sharply over the past year, down 165,000 since its recent peak in October 2024. With the working-age population growing rapidly, driven by immigration, then assuming there has not been a sharp rise in self-employment, the employment rate has fallen even faster, according to Resolution Foundation estimates.
“The Labour Force Survey appears to be giving a good read on unemployment at the moment. This is good news for the credibility of UK statistics, but bad news for households, with around 200,000 more people looking for work than last year. And it is also concerning for policymakers,” the think tank said.
“The implied rise in the inactivity rate is especially concerning for a government with a target to boost employment and GDP growth. And wage growth that looks too strong to be sustainable is likely to have slowed any adjustment to interest rates that the Bank of England would have taken in response to labour market loosening.”
Poor job numbers are not the only issue that the government has to contend with. Data published on Wednesday (20 August) shows the UK’s inflation issues look set to continue, with the Consumer Prices Index rising to 3.8% in July, up from 3.6% in June.
With the Bank of England now forecasting inflation to peak at 4%, before falling back, there is considerable pain yet to come for consumers at a time when economic weakness in the UK is becoming further exposed.
