UK unemployment rate unexpectedly rises

The number of UK job vacancies has fallen to its lowest level in five years and unemployment has ticked higher as the initial impact of the Iran war on businesses starts to be seen.

The unemployment rate rose slightly to 5% in the three months to March, from 4.9% in the three months to February, according to the Office for National Statistics (ONS).

Average regular earnings growth fell to 3.4% in the first three months of the year, and was 0.3% higher after inflation was taken into account.

Analysts said the figures show the first effects of the Middle East war on the jobs market, and warned that demand for workers would likely continue to weaken the longer the conflict goes on.

Early ONS estimates suggest the number of job openings fell by 28,000, or 3.9%, to 705,000 between February and April, its lowest level since April 2021.

"Lower-paying sectors such as hospitality and retail have seen some of the largest falls in vacancies and payroll numbers, both in recent months and over the last year," ONS director of economic statistics Liz McKeown said.

According to the ONS, the number of people on payrolls in April also fell. Payroll employment figures dropped by 100,000 last month.

McKeown pointed out the figures come at the start of the new tax year, and they "carry greater uncertainty and have often seen larger than average upward revisions".

But Richard Carter, head of fixed interest research at Quilter Cheviot, said the outlook suggested a similar pattern of falling payroll number could continue "for some time".

"Today's figures only capture the initial effects of the conflict, and the full impact will become more apparent in the coming months as higher costs and the potential for weaker consumer demand begin to filter through," he said.

Suren Thiru, chief economist for chartered accountants in England and Wales body ICAEW, said the jobs figures showed there was a "growing distress within the UK's labour market".

"The continued fall in job vacancies is a worrying sign of the strength of the labour market as it suggests that demand for staff is deteriorating quickly amid global headwinds and the growing financial squeeze on firms," he said.