THE UK’s rate of unemployment has risen as the number of job vacancies shrinks, according to new figures.
The Office for National Statistics’ (ONS) latest figures reveal the jobless rate continues to increase, with unemployment rising to 4.3% in the three months to March.
It is the highest rate unemployment has been for nearly a year and up from 4.2% in the three months to February.
The latest figures from the ONS also reveal there were 898,000 vacancies between February and April this year.
That’s a decrease of 26,000 from the previous three months and 188,000 lower than a year before.
It means there are more people looking for work but fewer jobs available.
However, the ONS’ latest data also reveal wages, excluding bonuses, rose by 6% between January and March, compared to the same time period in 2023.
In real terms, which takes into consideration how much salaries are rising compared to inflation, wage growth for regular pay was 2%.
If wages are increasing but not matching inflation, it means people can feel worse off, as they’re not keeping up with the cost of living.
Chancellor Jeremy Hunt said: “This is the 10th month in a row that wages have risen faster than inflation, which will help with the cost-of-living pressures on families.
“While we are dealing with some challenges in our labour supply, including pandemic impacts, as our reforms on childcare, pensions tax reform and welfare come online I am confident we will start to increase the number of people in work.”
The ONS said annual average earnings across the public sector rose by 6.3% between January and March compared to the same three months in 2023.
It said the manufacturing sector and the finance and business services sector saw the largest annual regular growth – 6.8%.
ONS director of economic statistics Liz McKeown added: “We continue to see tentative signs that the jobs market is cooling, with both employment from our household survey and the number of workers on payroll showing falls in the latest periods.
“At the same time the steady decline in the number of job vacancies has continued for a twenty-second consecutive month, although numbers remain above pre-pandemic levels.
“Earnings growth in cash terms remains high, with the recent falls in the rate now levelling off while, with inflation falling, real pay growth remains at its highest level in well over two years.”
Why does inflation matter?
INFLATION is a measure of the cost of living. It looks at how much the price of goods, such as food or televisions, and services, such as haircuts or train tickets, has changed over time.
Usually people measure inflation by comparing the cost of things today with how much they cost a year ago. The average increase in prices is known as the inflation rate.
The government sets an inflation target of 2%.
If inflation is too high or it moves around a lot, the Bank of England says it is hard for businesses to set the right prices and for people to plan their spending.
High inflation rates also means people are having to spend more, while savings are likely to be eroded as the cost of goods is more than the interest we’re earning.
Low inflation, on the other hand, means lower prices and a greater likelihood of interest rates on savings beating the inflation rate.
But if inflation is too low some people may put off spending because they expect prices to fall. And if everybody reduced their spending then companies could fail and people might lose their jobs.
See our UK inflation guide and our Is low inflation good? guide for more information.
Rising unemployment is bad news, as it means less people in work and pumping money into the economy.
Rising wages, particularly in real terms, is good news for workers though, as it means their salaries are keeping pace with the cost of living.
But it can also drive inflation, as businesses raise the price of their services and goods to stay profitable.
The Bank of England raises its base rate to control runaway inflation, with its rate currently sat at 5.25%.
But a rise in interest rates spells bad news for homeowners who are forced to pay out more on their mortgages.
Cooling inflation in recent months has seen economists predicting the BoE will lower interest rates later this summer though.
That means mortgage rates should then fall.
It comes after the latest figures revealed the UK economy has exited recession after GDP rose by 0.6%.
Alice Haines, personal finance analyst at Bestinvest, said the latest wage growth data could mean interest rates come down slower than expected though.
She said: “With pay packets stretching much further than they did a year ago, household budgets may feel slightly more comfortable with the prospect of an imminent rate cut delivering another boost to consumer finances after a challenging couple of years.
“The likelihood of a summer rate cut, with many consumers pinning their hopes on a move as early next month, may be slightly dented by the better-than-expected pay growth data.”
Last week, Andrew Bailey, BoE governor, said the latest inflation figures were “encouraging”, and it expected it to slow to the bank’s 2% target in the “next couple of months”.
Inflation stood at 3.2% in March, the latest figures revealed.
However, Mr Bailey said it needed “more evidence” inflation will stay low before it would consider cutting interest rates.
The latest inflation figures will be released next Wednesday (May 22).
What it means for your money
Higher unemployment rates are obviously bad, as it means more people are out of work and not earning money.
It also means less money is being pumped into the economy, which can see GDP slow.
When GDP falls it means the economy is shrinking and governments have less of the public’s money to spend on public services.
It can also mean taxes rise which means less money in your pocket.
Alice Haines, from BestInvest, added: “Job uncertainty can be very unsettling for workers, particularly those with no backup savings in place.
“The financial implications for those that cannot secure a new job quickly can be severe with the longer they are unemployed raising the prospect of bills remaining unpaid and debts piling up.
“Building up solid financial reserves that can cover up to six months’ of expenses is important in uncertain times.
“Paying down expensive debts and avoiding unnecessary expenditure will also ease any fears around being able to cover a lengthy period without income.”
The National Minimum and National Living wages rose for millions across the UK last month.
This means some people would be better off by £1,800 a year.
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