The United Kingdom’s unemployment rate rose to 4.4% in the three months ending in November, according to the Office for National Statistics (ONS).
This marks an increase from 4.3% in the previous quarter and is the joint-highest level since 2021, signaling potential challenges for the UK economy.
Unemployment Trends and Wage Growth in Focus
The rise in unemployment coincides with a sharp decline in registered payroll jobs, which fell at the fastest pace since November 2020. This downturn suggests that economic pressures may have intensified as 2024 drew to a close. Despite the loosening labor market, average regular pay surged by 5.6%, up from 5.2% in the prior three-month period, highlighting a complex economic picture.
Bank of England Faces Pressure on Interest Rates
The increase in unemployment could prompt the Bank of England (BOE) to consider further adjustments to its monetary policy. The BOE lowered its key interest rate twice in 2024, opting for a cautious approach compared to the more aggressive rate cuts by the European Central Bank and the U.S. Federal Reserve.
One factor influencing BOE policy is the rapid rise in wages, which could drive inflation in labor-intensive sectors. Annual inflation rose to 2.5% in December from 2.2% in November, suggesting that price pressures remain a concern for policymakers.
Economic Outlook Remains Uncertain
As the UK grapples with rising unemployment, wage growth, and inflationary pressures, the economic outlook remains uncertain. Policymakers will likely weigh these factors carefully in their upcoming decisions to stabilize the economy and meet inflation targets.
