UK unemployment held steady at 4.4 per cent in the three months to January, as the number of people claiming jobless benefits saw a sharp rise.
The latest figures have intensified pressure on Chancellor Rachel Reeves, with concerns growing over the state of the UK labour market and the government’s response to the jobs crisis.
Despite concerns about economic stagnation, average earnings—excluding bonuses—grew 5.9 per cent year-on-year, with real wages rising 3.2 per cent after inflation.
While this offers some relief to workers, it adds pressure on the Bank of England as it considers its next move on interest rates.
This stability comes amid concerns that Reeves’s recent budget, which includes a £25 billion increase in employer national insurance contributions set to take effect in April, could impact hiring practices.
Despite the unchanged unemployment rate, other labor market indicators suggest potential challenges ahead.
The number of job vacancies has declined for the 30th consecutive month, dropping by 24,000 to 812,000—the lowest level in over three years.
Additionally, payrolled employees decreased by 47,000 in December, marking the most significant fall since November 2020.
Unemployment remains high
GBNEWS
Despite unemployment remaining steady, the number of people claiming jobless benefits jumped by 44,200 in February 2025, a sharp rise from the 2,800 increase in January and well above the expected 7,900 new claimants.
Employment figures for January showed a rise of 144,000 people in work, up from 107,000 in December, suggesting positive job creation during that period.
These figures paint a mixed picture of the labour market—steady unemployment, a surge in benefit claims, continued job creation, and resilient wage growth.
Employment figures for January showed a rise of 144,000 people in work
GBNEWS
Alice Haine, Personal Finance Analyst at Bestinvest by Evelyn Partners, the wealth manager said: “Resilient wage growth poses a problem for the Bank of England as it mulls what action to take on interest rates later today.
“The UK economy has been grappling with lacklustre growth in recent months, but the central bank’s mission is to keep inflation at bay and with the headline rate creeping back up again recently, markets are expecting interest rates to remain on hold at 4.5 per cent.
“When you consider the inflationary impact the Chancellor’s impending tax measures will have for businesses, with a number of major companies already announcing plans to pass on rising costs to consumers, the outlook from here for household budgets is far from rosy.
“Add in the hit from rising household bills, with energy, water and council tax charges all set to go up from April 1 along with rising concerns about job and income security and households are likely to be feeling very worried once again.”
Work and Pensions Secretary, Liz Kendall MP, said: “Today’s figures demonstrate the scale of the challenge we’re still facing to get Britain working again.
“The reforms I have announced will ensure everyone who can work gets the active support they need, including through an extra £1 billion for personalised health, skills and employment support for sick and disabled people.
“We’ve already put in place measures to make work pay and improve job security – including through the National Minimum Wage increase and our Employment Rights Bill. Since the election, we’ve also seen year on year wages after inflation growing at their fastest rate in three years – worth an extra £1,000 a year on average in the pockets of working people.
“This comes on top of our plan to Get Britain Working as part of our wider Plan for Change to boost economic growth, drive up living standards, and tackle the spiralling benefits bill to ensure the system lasts into the future for those who need it.”
