The Office for National Statistics reported a decline in the UK’s unemployment rate to 4.9% in the three months leading up to February, down from 5.2% in the previous three months. During the same period, average wages saw a 3.6% increase, slightly lower than January’s 3.8%, marking the lowest growth since November 2020. Pay, including bonuses, rose by 3.8%, surpassing expectations.
These statistics predate the full impact of the Middle East conflict, with concerns rising about potential inflation and its effects on unemployment due to increased costs affecting hiring decisions by companies. Wage growth in the public sector stood at 5.2%, while the private sector saw a 3.2% increase.
Although the estimated number of job vacancies decreased in the latest quarter, remaining relatively stable since March to May 2025, early data for January to March indicated a significant drop to 711,000 vacancies, down by 29,000 compared to the previous quarter.
Liz McKeown, the ONS Director of Economic Statistics, highlighted that while unemployment decreased slightly, the number of individuals not actively seeking work increased, possibly due to fewer students searching for employment alongside their studies. Wage growth has slowed, reaching its lowest rate in over five years.
Yael Selfin, chief economist at KPMG UK, noted that wage growth was decelerating before the Middle East conflict, reducing the risk of energy costs affecting pay pressures. The labor market’s current state limits workers’ bargaining power, potentially preventing a wage-price spiral. The Bank of England is expected to maintain interest rates amid these conditions.
Luke Bartholomew, deputy chief economist at Aberdeen, expressed skepticism about the unemployment drop, attributing it to rising inactivity rather than increased hiring. He emphasized weak payrolls data and anticipated negative real wage growth for households, with inflation expected to rise.
The data precedes the upcoming inflation report by the ONS, which will shed light on the early impact of the Middle East conflict in March.
