Unemployment rate climbs unexpectedly and job vacancies plummet to five-year low amid Iran war shock

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Britain’s unemployment rate has unexpectedly climbed, while job vacancies have plummeted to their lowest level in five years, as firms are squeezed by the impact of the Iran war.

Official figures from the Office for National Statistics (ONS) reveal that the jobless rate rose to 5 per cent in the three months to March, an increase from 4.9 per cent in the preceding three-month period.

This uptick defied the prediction of most economists, who had anticipated that the rate would remain stable.

The ONS also estimated a sharp decline of 100,000 workers on UK payrolls during April, bringing the total to 30.2 million.

This represents the largest monthly fall since May 2020, at the height of the Covid pandemic, though these figures are subject to future revisions.

Meanwhile, the number of available job vacancies decreased by 28,000 quarter-on-quarter to 705,000 in the three months to April, marking the lowest level recorded since the same period in 2021.

The unemployment rate has unexpectedly risen to 5 per cent (Reuters)

Retail and hospitality firms saw some of the largest falls in payroll numbers and vacancies, with the ONS saying firms in the sectors were flagging “economic and geopolitical uncertainty” as reasons to halt hiring.

Regular earnings growth meanwhile also fell back further, to 3.4 per cent in the first quarter, down from 3.6 per cent in the three months to February and the lowest level since October 2020 – only just outpacing Consumer Prices Index inflation, by 0.3 per cent.

Liz McKeown, ONS director of economic statistics, said: “Latest figures suggest the labour market remains soft, with vacancies at their lowest level in five years and unemployment higher than a year ago.”

She added: “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.”

The figures follow recent warnings over rising unemployment as a result of the inflation shock caused by the Iran war and the impact on consumer spending and the wider economy.

The Bank of England last month predicted that even in its most positive forecast, unemployment would hit 5.5 per cent in 2027, with this increasing to 5.6 per cent in a more extreme impact scenario.

Retail and hospitality firms are seen as being particularly exposed, having already been hit with soaring labour costs in recent years.

The ONS said retail vacancies were down 7,000 quarter on quarter in the three months to April while they were 11,000 lower for hospitality.

The number of payroll workers in the sectors were also sharply lower, with retail estimated to be down 76,000 year on year in April and hospitality seeing a 75,000 drop.

This is having a major impact on young workers, who traditionally find work in those sectors, with the ONS revealing the rate of unemployment among 16 to 24-year-olds jumped to 16.2 per cent in the three months to March – the highest level since 2015.

Work and Pensions Secretary Pat McFadden stressed the latest figures also showed 416,000 more people in work than a year ago.

He said: “While this is encouraging, we know the conflict in the Middle East is casting a shadow on the labour market.”